Judge: Monica Bachner, Case: BC681033, Date: 2022-10-28 Tentative Ruling
Case Number: BC681033 Hearing Date: October 28, 2022 Dept: 71
Superior Court of California
County of Los Angeles
DEPARTMENT 71
TENTATIVE RULING
|
PIPER CARE MANAGEMENT aka PIPER CASE MANAGEMENT AND CONSULTING, INC., and GERALDINE BEUTLER,
vs.
PAMC, LTD., et al. |
Case No.: BC681033
Hearing Date: October 28, 2022 |
Defendants PAMC, Ltd.’s and Pacific Alliance Medical Center, Inc.’s demurrer to Plaintiffs Piper Care Management aka Piper Care Management and Consulting Inc.’s and Geraldine Beutler’s fourth amended complaint is sustained as to the 8th and 10th cause of action without leave to amend, and overruled as to the 2nd, 3rd, 5th, 6th, and 7th causes of action.
Defendants PAMC, Ltd. and Pacific Alliance Medical Center, Inc. (collectively “PAMC Defendants”), demur to Piper Care Management aka Piper Case Management and Consulting, Inc.’s (“Piper”) and Geraldine Beutler’s (“Beutler”) (collectively, “Plaintiffs”) fourth amended complaint (“4AC”) as to the 2nd (fraud and deceit), 3rd (unjust enrichment), 5th (unfair business practices and acts), 6th (negligent misrepresentation), 7th (intentional misrepresentation), 8th (misuse and misappropriation of trade secrets and confidential information), and 10th (conversion) causes of action on the basis they are all superseded by the 9th cause of action for violation of the California Uniform Trade Secrets Act (“CUTSA”). (Notice of Demurrer, pg. 2; C.C.P. §430.10(e).)
Background
Plaintiffs filed the operative 4AC on June 20, 2022, against PAMC Defendants and non-moving Defendants Stephen Shuo Wang (“Wang”) and Premier Wound Care of Los Angeles (“PWC”) (collectively, “Wang Defendants”). The 4AC alleges ten causes of action: (1) breach of contract (non-compete and confidentiality clauses); (2) fraud and deceit; (3) unjust enrichment; (4) defamation (dismissed 4/22/21); (5) unfair business acts and practices; (6) negligent misrepresentation; (7) intentional misrepresentation; (8) misuse and misappropriation of trade secrets and confidential information; (9) California Uniform Trade Secrets Act (“CUTSA”); and (10) conversion. (4AC.) The Court notes Plaintiffs only allege the 1st, 2nd, 3rd, 5th, 6th, 7th, 8th, 9th, and 10th causes of action against PAMC Defendants.
Plaintiffs allege PAMC violated written agreements it executed with Piper by and through Plaintiffs’ principal, Beutler, agreeing that wound care services created by Piper would be provided to PAMC’s patients, including hyperbaric oxygen therapy program (“HBO”) treatments. (4AC ¶¶1-4.) Inpatient wound care was performed at PAMC hospital at 531 W. College St., Los Angeles, California, and HBO services and surgical outreach were performed at PAMC’s facility at 711 West College St., Medical Office Building, Suite 188, Los Angeles, California, 90012 (“Suite 188”) since 2006 under the supervision of Wang, who supervised the HBO dives and where Plaintiffs maintained their property in 10 file cabinets and 4 computer towers, as well as 6 file cabinets in separate office on the fourth floor. (4AC ¶1.) Plaintiffs allege both the wound care and HBO therapy programs were developed solely by Plaintiffs. (4AC ¶1.)
Plaintiffs allege PAMC informed Plaintiffs on or about December 19, 2016, of an ongoing Department of Justice (“DOJ”) investigation of Piper and that PAMC’s contract with Piper would need to be renegotiated because Plaintiffs were being accused of compliance issues; to date, a DOJ investigation involving Piper had never taken place. (4AC ¶¶8-10.) PAMC allegedly informed Plaintiffs that their written agreements would terminate effective July 31, 2017, and PAMC intended to negotiate a new agreement with Piper within 30 days. (4AC ¶12.) Plaintiffs allege after Plaintiffs’ contract with PAMC was not renegotiated or renewed, PAMC continued operating Plaintiffs’ wound care and HBO program, and continued to use of Plaintiffs’ property without its consent or payment to Piper. (4AC ¶14.) Plaintiffs allege beginning December 1, 2017, after leasing Suite 188 and purchasing equipment and materials in 10 file cabinets and 4 computer towers, PWC and Wang continued operating Plaintiffs’ wound care and HBO program for its own financial gain at the same location, which continues to date. (4AC ¶14.) Plaintiffs allege PAMC informed Wang the official closure of PAMC hospital would take place on December 11, 2017, and that PAMC did not give public and official notice that PAMC hospital was closing on November 30, 2017, until on or about October 30, 2017. (4AC ¶¶14-15.)
Plaintiffs allege Wang began negotiations with PAMC on or about October 26, 2017, to convert Plaintiffs’ hospital-based program into a physician-based program and Wang entered into a contract for sale of Plaintiffs’ property, both hard copy and electronic materials, including Plaintiffs’ policies and procedures and trade secrets maintained at Suite 188. (4AC ¶15.) Plaintiffs allege Wang began to incorporate PWC, which assumed operation of Plaintiffs’ business on December 1, 2017, in Suite 188, whereby PWC purchased from PAMC all Plaintiffs’ physical equipment maintained in Suite 188 for 9 years. (4AC ¶15.) Plaintiffs allege PAMC and PWC have acted in concert since on or about December 20, 2017, to prevent the return of Plaintiffs’ property by opposing Plaintiffs’ Temporary Restraining Order on December 20, 2022 (sic), and to date, most of Plaintiffs’ materials in Suite 188 have not been returned. (4AC ¶15.)
On July 20, 2022, PAMC Defendants filed the instant demurrer. On October 12, 2022, Plaintiffs filed their opposition. On October 18, 2022, PAMC Defendants filed their reply.
Summary of Demurrer
In support of its demurrer to the 4AC, PAMC Defendants demur to the 2nd, 3rd, 5th, 6th, 7th, 8th, and 10th causes of action on the basis they are all superseded by the 9th cause of action for violation of the California Uniform Trade Secrets Act (“CUTSA”). (Demurrer, pgs. 4-6.)
Supersession by CUTSA
PAMC Defendants argue Plaintiffs’ 9th cause of action under CUTSA implicitly preempts alternative civil remedies “based on the same nucleus of facts” as the trade secret misappropriation claim. (K.C. Multimedia, Inc. v. Bank of America Technology & Operations, Inc. (2009) 171 Cal.App.4th 939, 958; Mattel, Inc. v. MGA Entertainment, Inc. (C.D. Cal. 2011) 782 F.Supp.2d 911, 985.) PAMC Defendants argue Plaintiffs’ claims alleging alternative civil remedies cannot survive CUTSA suppression unless they “allege wrongdoing that is materially distinct from the wrongdoing alleged in a CUTSA claim.” (SunPower Corp. v. SolarCity Corp. (N.D. Cal. Dec. 11, 2012, No. 12-CV-00694-LHK) 2012 WL 6160472, at *3-*9.)
CUTSA defines what it preempts by defining what it does not preempt: “any statute relating to misappropriation of a trade secret, or any statute otherwise regulating trade secrets” or “(1) contractual remedies, whether or not based upon misappropriation of a trade secret, (2) other civil remedies that are not based upon misappropriation of a trade secret, or (3) criminal remedies, whether or not based upon misappropriation of a trade secret.” (Civ. Code §§3426.7(a), (b).) Whether a claim is based on trade secret misappropriation is largely a factual determination. (K.C. Multimedia, Inc., 171 Cal.App.4th at pg. 954; Silvaco Data System v. Intel Corp. (2010) 184 Cal.App.4th 210, 241-242.)
Misuse and Misappropriation of Trade Secrets and Confidential Information (8th COA)
A cause of action for trade secret misappropriation includes the following elements: (1) Plaintiff’s ownership of trade secret; (2) defendant acquired, disclosed, or used the trade secret through improper means; and (3) such actions damaged plaintiff. (Sargent Fletcher, Inc. v. Able Corp. (2003) 110 Cal.App.4th 1658, 1665. see also Vacco Industries, Inc. v. Van Den Berg (1992) 5 Cal.App.4th 34, 50 [“By its adoption of the Uniform Trade Secrets Act, California effectively adopted the common law definition.”]; FLIR Systems, Inc. v. Parrish (2009) 174 Cal.App.4th 1270, 1279 [Trade Secrets Act requires actual or threatened misappropriation, beyond mere possession of trade secrets by employees]; PWC, Inc. v. Kadisha (2000) 78 Cal.App.4th 1368, 1385 [“misappropriation is not limited to the initial act of improperly acquiring trade secrets; the use and continuing use of the trade secrets is also misappropriation.”]; CACI 4401.)
Plaintiffs’ trade secret misappropriation causes of action are based on allegations that pursuant to Plaintiffs’ July 1, 2008 contract with PAMC, the parties acknowledged that Plaintiffs’ wound care program was developed by Plaintiffs, that all records, books, manuals and documents and all materials in any form, were the property of Plaintiffs, and acknowledge that the goods, services and training provided by plaintiffs were the result of extensive research development and expense. (4AC ¶81.) For all purposes, Plaintiffs’ property included both trade secret and confidential information that is not placed in the public domain. (4AC ¶81.) After Plaintiffs’ contract was terminated on June 30, 2017, all of Plaintiffs’ private property remained in PAMC’s possession, which allowed PAMC to acquire possession of all of Plaintiffs’ trade secrets and confidential information. (4AC ¶82.) Plaintiffs allege PAMC knew or had reason to know Plaintiffs’ trade secrets and confidential information was derived by PAMC’s failure to inform Plaintiffs that PAMC’s hospital was closing, a material fact known by PAMC in June 2017. (4AC ¶82.) PAMC had a duty to maintain the secrecy and limit the use of Plaintiffs’ trade secrets and confidential information, and PAMC knew at the time it took possession of Plaintiffs’ property that the property contained both trade secrets and confidential information that they acquired through deception. (4AC ¶83.) Plaintiffs allege Wang’s prior knowledge of Plaintiffs’ business over a period of nine years, including knowledge of Plaintiffs’ policies and procedures and trade secrets, enabled Wang to open PWC and Wang could not have opened PWC without such knowledge. (4AC ¶84.) Plaintiffs alleges Wang conspired with John Edwards, CEO of PAMC, to open PWC at the same location where Piper had been operating for nine years, which resulted in PWC leasing Suite 188 and the sale of Plaintiffs’ property to Wang Defendants, including the ten filing cabinets and four computer towers containing Plaintiffs’ trade secrets and confidential information. (4AC ¶¶84, 87-88.)
PAMC Defendants argue Plaintiffs’ cause of action for misuse and misappropriation of trade secrets and confidential information is presumptively asserted under common law rather than CUTSA and is therefore wholly superseded by CUTSA because CUTSA “‘occupies the field’ of common law claims based on the misappropriation of a trade secret.” (Mattel, 782 F.Supp.2d at pg. 985, quoting K.C. Multimedia, 171 Cal.App.4th at pg. 954.) PAMC Defendants argue other than the express statutory exemptions set forth in §3426.7, CUTSA “implicitly preempts alternative civil remedies based on trade secret misappropriation.” (K.C. Multimedia, 171 Cal.App.4th at pg. 954.) PAMC Defendants further argue there is no California common law action for “misuse” or “misappropriation” of confidential information that does not rise to the level of trade secrets, and such tort claims are superseded by CUTSA. (Silvaco, 184 Cal.App.4th at pg. 239 & n.22.)
Here, Plaintiffs allege a cause of action in tort for common law misuse and misappropriation of trade secrets and confidential information based on the same nucleus of facts as Plaintiff’s 9th cause of action under CUTSA. Plaintiffs’ allegations that “all records, books, manuals and documents and all materials in any form, were the property of Plaintiffs, and . . . the goods, services and training provided by plaintiffs were the result of extensive research development and expense” and “Plaintiffs’ private property remained in PAMC’s possession, which allowed PAMC to acquire possession of all of Plaintiffs’ trade secrets and confidential information,” fall within the ambit of a cause of action in tort expressly superseded by CUTSA. (4AC ¶¶ 81, 82; Silvaco, 184 Cal.App.4th at pg. 239 & n.22.) While Plaintiffs argue its cause of action survives on the basis that, even if no trade secret is found, the 4AC pleads books, manuals, documents, material or other business and technical information that contains confidential information, citing Javo Beverage Co. v. California Extraction Ventures, Inc., Plaintiffs’ cause of action still arises from the “same nucleus of facts.” (4AC ¶81; Javo Beverage Co., Inc. v. California Extraction Ventures, Inc. (S.D. Cal., Dec. 2, 2019, No. 19-CV-1859-CAB-WVG) 2019 WL 6467802, at *4.)
Accordingly, PAMC Defendants’ demurrer to Plaintiffs’ 8th cause of action for misuse and misappropriation of trade secrets and confidential information is sustained without leave to amend.
Unjust Enrichment (3rd COA)
A cause of action for unjust enrichment requires the following elements: (1) receipt of a benefit; (2) unjust or wrongful retention of the benefit; (3) at the expense of another. (Lyles v. Sangadeo-Patel (2014) 225 Cal.App.4th 759, 769, quotation marks and citations omitted.)
Plaintiffs’ unjust enrichment cause of action is based on allegations that between July 30, 2017, and November 30, 2017, PAMC operated Plaintiffs’ wound care and HBO program, utilizing all of Plaintiffs’ property, and then caused the opening of a new specialty wound care program by Wang Defendants without Plaintiffs’ consent and without payment to Piper in violation of the non-compete and confidentiality clauses of Plaintiffs’ contract with PAMC. (4AC ¶50.) Plaintiffs allege PAMC closed and that Plaintiffs’ wound care and HBO program, located in PAMC’s building, was re-licensed as a specialty clinic to Wang, all within the immediate area, in violation of the Contract’s non-compete clause and confidentiality clauses of the Contract. (4AC ¶53.) Plaintiffs allege it would be unfair and unjust to allow Wang Defendants to retain its property without payment of $55,000 per month for each month it operated Plaintiff’s program without consent or payment to Plaintiffs. (4AC ¶56.)
PAMC Defendants argue Plaintiffs’ cause of action for unjust enrichment is superseded by CUTSA because Plaintiffs’ allegations are a restatement of the same operative facts supporting a CUTSA cause of action. (Motion, pg. 20 citing Silvaco, 184 Cal.App.4th at pgs. 236, 240 [affirming order sustaining demurrer to “common count” for unjust enrichment].)
Plaintiffs’ claims do not merely arise from the same nucleus of operative fact as its CUTSA claim. Indeed, Plaintiffs allege that Defendants usurped all of Plaintiffs’ business, nor just trade secrets. (4AC, ¶ 50.) Moreover, unlike Silvaco, here, Plaintiffs’ allegations are based upon contract claims expressly exempt from CUTSA supersession. (Civ. Code §3426.7(b)(1).) Plaintiffs allege Defendants violated the non-compete and confidentiality clauses of the Contract; Plaintiffs were induced to wait for a new contract that PAMC Defendants never intended to negotiate; Defendants formed the intent to operate Plaintiff’s program for its own financial gain; and allege a quasi-contract exists for the reimbursement of Plaintiff for all monies owed by Defendants for the operation of Piper’s wound care and HBO program. (4AC ¶¶50, 52, 56.)
Accordingly, PAMC Defendants’ demurrer to Plaintiffs’ 3rd cause of action for unjust enrichment is overruled.
Unfair Business Acts and Practices (5th COA)
A cause of action for unfair business acts and practices includes the following elements: (1) a business practice; (2) that is unfair, unlawful or fraudulent; and (3) and authorized remedy. (Bus. & Prof. Code §17200; Paulus v. Bob Lynch Ford, Inc. (2006) 139 Cal.App.4th 659, 676; see also Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 337 [although losses are required for standing, “ineligibility for restitution is not a basis for denying standing under section 17204….”]; People ex rel. Department of Motor Vehicles v. Cars 4 Causes (2006) 139 Cal.App.4th 1006, 1016 [“An ‘unlawful’ practice requires violation of another statute, and a business practice may be ‘unfair’ even if not otherwise proscribed by statute as long as the practice is not expressly authorized by law.”]; Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1266 [Legislature intended this sweeping language to include anything that can properly be called a business practice and that at the same time is forbidden by law]; Drum v. San Fernando Valley Bar Association (2010) 182 Cal.App.4th 247, 256 [“a split of authority developed among the Courts of Appeal, which have applied three different tests for unfairness in consumer cases.”].)
Plaintiffs’ unfair business acts and practices cause of action is based on allegations that PAMC’s June 30, 2017 termination of their Contract with Piper was a result of PAMC’s statement that Piper needed to increase its Medi-Care admissions, or its contract would not be renegotiated. (4AC ¶63.) In reliance of PAMC’s assurances that a new contract would be renegotiated, Plaintiffs allowed their property to remain in the possession of PAMC. (4AC ¶63.) Plaintiffs allege PAMC’s agents made these assurances to induce Plaintiff to wait for a new contract that PAMC never intended to negotiate, and formed the intent to operate Plaintiffs’ program for its own financial gain. (4AC ¶67.) Plaintiffs allege PAMC closed Plaintiffs’ wound care and HBO program, located in PAMC’s building, was relicensed as a specialty wound care clinic at the same location to Wang, all within the immediate area, and all Plaintiffs’ materials were sold to Wang Defendants in violation of Plaintiffs’ contract’s non-compete and confidentiality clauses, which includes the wrongful disclosure and dissemination of Plaintiffs’ books, manuals, documents, material, and other business and technical information to third parties without Plaintiffs’ consent. (4AC ¶68.)
PAMC Defendants argue Plaintiffs’ cause of action for unfair business practices is based on the same “nucleus of facts” as the CUTSA claim and is therefore superseded. (SunPower, 2012 WL 6160472, at *3; Coast Hematology-Oncology Associates Medical Group, Inc. v. Long Beach Memorial Medical Center (2020) 58 Cal.App.5th 748, 769-770.) PAMC Defendants argue statutory claims under §17200 are superseded when they are based on the same nucleus of operative facts as the CUTSA claim. (K.C. Multimedia, 171 Cal.App.4th at pg. 961.)
Plaintiffs’ cause of action for unfair business practices is not merely based on the same “nucleus of facts” as the CUTSA claim. (Id. at 962.) Again, there is an allegation of misappropriating the entire business. (FAC, ¶ 50.)
Accordingly, PAMC Defendants’ demurrer to Plaintiffs’ 5th cause of action for unfair business acts and practices is overruled.
Fraud and Deceit, Negligent Misrepresentation, and Intentional Misrepresentation (2nd, 6th, and 7th COAs)
“The elements of fraud are (a) a misrepresentation (false representation, concealment, or nondisclosure); (b) scienter or knowledge of its falsity; (c) intent to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Hinesley v. Oakshade Town Center (2005) 135 Cal.App.4th 289, 294.) The facts constituting the alleged fraud must be alleged factually and specifically as to every element of fraud, as the policy of “liberal construction” of the pleadings will not ordinarily be invoked. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.) To properly allege fraud against a corporation, the plaintiffs must plead the names of the persons allegedly making the false representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written. (Tarmann v. State Farm Mutual Automobile Insurance Co. (1991) 2 Cal.App.4th 153, 157.)
“California courts have recognized a cause of action for negligent misrepresentation, i.e., a duty to communicate accurate information, in two circumstances. The first situation arises where providing false information poses a risk of and results in physical harm to person or property. The second situation arises where information is conveyed in a commercial setting for a business purpose.” (Friedman v. Merck & Co. (2003) 107 Cal.App.4th 454, 477.)
“The elements of a cause of action for intentional misrepresentation are (1) a misrepresentation, (2) with knowledge of its falsity, (3) with the intent to induce another’s reliance on the misrepresentation, (4) actual and justifiable reliance, and (5) resulting damage.” (Daniels v. Select Portfolio Servicing, Inc. (2016) 246 Cal.App.4th 1150, 1166.) The facts constituting the alleged fraud must be alleged factually and specifically as to every element of fraud, as the policy of “liberal construction” of the pleadings will not ordinarily be invoked. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.) To properly allege fraud against a corporation, the plaintiffs must plead the names of the persons allegedly making the false representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written. (Tarmann v. State Farm Mutual Automobile Insurance Co. (1991) 2 Cal.App.4th 153, 157.)
Plaintiffs’ fraud cause of action is based on allegations that in early 2015, through July 2017, Piper was informed by PAMC Defendants’ representatives, John Edwards, Patricia Suarez, and Steve Canyon, that Piper’s contract needed to be renegotiated, and Plaintiffs negotiated in good faith, which included multiple concessions by Piper involving payment and bonuses. (4AC ¶37.) Plaintiffs allege Piper was provided with a new proposed contract in draft, but on June 30, 2017, Piper was informed in writing by PAMC Defendants that it was formally terminating the Contract, although it was PAMC Defendants’ intent to negotiate a new agreement within 30 days. (4AC ¶¶37, 71, 76.) Plaintiffs allege PAMC Defendants’ intent to negotiate a new agreement within 30 days was false and designed solely to allow PAMC Defendants to continue operating the Contract without Piper’s involvement or payment to Piper for the use of its wound care and HBO programs. (4AC ¶37, 72, 77.) Plaintiffs allege PAMC Defendants knew PAMC was involved in a DOJ investigation and the hospital was closing but failed to inform Plaintiffs. (4AC ¶37.) Plaintiffs allege during the 30 day-notice period, Steve Canyon communicated with Beutler and requested development of a plan to increase Medi-Care admission to PAMC. (4AC ¶39.) Plaintiffs allege Canyon stated he must be satisfied with the plan and if Piper was not able to increase Medi-Care admissions that the Contract would not be re-negotiated. (4AC ¶39.) Thereafter, Beutler was informed that Canyon was working on renegotiating the contract and she would be contacted. (4AC ¶39.) Plaintiffs allege Beutler was never contacted. (4AC ¶39.) Plaintiffs allege between early 2015 to July 2017, Piper waited to re-negotiate the Contract while PAMC continued operating Piper’s wound care and hyperbaric program without Piper’s consent. (4AC ¶40.) Piper alleges between July 30, 2017, and November 30, 13, 2017, PAMC Defendants continued operating Piper’s wound care and HBO program, utilizing all of Piper’s property to operate its own specialty program, without Piper’s consent and without payment to Piper, while it negotiated with Wang Defendants to open a new specialty program involving Piper’s wound care and HBO services with Wang Defendants. (4AC ¶41.) Plaintiffs alleges because of PAMC Defendants’ acts and omissions, and Plaintiffs’ detrimental reliance thereof, PAMC Defendants damaged Plaintiffs. (4AC ¶¶45, 74, 79.)
PAMC Defendants argue Plaintiffs’ 2nd, 6th, and 7th causes of action are subject to CUTSA because they are based on the same nucleus of operative facts as the CUTSA claim. (Demurrer, pgs. 21-22, K.C. Multimedia, 171 Cal.App.4th at pg. 961; Silvaco, 184 Ca.App.4th 210, 236 [“Since none of [the causes of action] sounds in contract, they are all superseded by CUTSA, and none of them states a cause of action independent of that act.]”) To the contrary, they are more than a restatement of trade secret misappropriation, and involve usurping the entire business, including employees, location, business relation and good will, and (FAC ¶ 50), reliance on false representations. (FAC ¶¶50, 51.) Accordingly, PAMC Defendants’ demurrer to Plaintiffs’ 2nd, 6th, and 7th causes of action for unfair business acts and practices is overruled.
Conversion (10th COA)
“Conversion is the wrongful exercise of dominion over the property of another. The elements of a conversion are: (1) the plaintiff’s ownership or right to possession of the property at the time of the conversion; (2) the defendant’s conversion by a wrongful act or disposition of property rights; and (3) damages. It is not necessary that there be a manual taking of the property; it is only necessary to show an assumption of control or ownership over the property, or that the alleged converter has applied the property to his own use.” (Farmers Insurance Exchange v. Zerin (1997) 53 Cal.App.4th 445, 451-452.)
Plaintiffs’ conversion cause of action is based on allegations that Plaintiffs are the rightful owners of their personal and private property, consisting of Plaintiffs’ wound care program, all records, books, manuals, documents, and all materials in any form, including goods, services and training provided by Plaintiffs, that were the result of extensive research, development, and expense. (4AC ¶92.) Plaintiff alleges PAMC and Wang’s prior knowledge of Plaintiffs’ business over a period of 9 years, including knowledge of Plaintiffs’ policies and procedures and trade secrets, enabled Wang to open PWC, which could not have opened without such prior knowledge and without Plaintiffs’ policies and procedures needed to run a hyperbaric unit. (4AC ¶92.) Plaintiff alleges PAMC and Wang Defendants intended to and/or negligently assumed control and ownership over Plaintiff’s private property for the period of June 30, 2017, and continuing to date for their own use and doing business under PWC through operation of Plaintiffs’ business and sale of Plaintiffs’ property to Wang Defendants. (4AC ¶93.)
PAMC Defendants argue Plaintiffs’ 10th cause of action is based on the “same nucleus of facts” as its CUTSA claim because CUTSA preempts claims for the conversion of physical documents, “unless the value of the converted property is rooted in something other than the information it contains.” (Henry Schein, Inc. v. Cook (N.D. Cal., Mar. 1, 2017, No. 16-CV-03166-JST) 2017 WL 783617, at *5.) However, Plaintiffs’ 10th cause of action sounds in tort and alleges the conversion of “records, books, manuals, documents, and all materials in any form, including goods, services and training provided by Plaintiffs, that were the result of extensive research, development, and expense,” implicating Plaintiff’s CUTSA cause of action. (4AC, ¶ 92 (emphasis added) see Henry Schein, Inc., 2017 WL 783617, at *5.)
Accordingly, PAMC Defendants’ demurrer to Plaintiffs’ 10th cause of action for conversion is sustained.
Accordingly, PAMC Defendants’ demurrer to the 4AC for supersession under CUTSA as to the 8th and 10th causes of action are sustained without leave to amend and overruled as to the 2nd, 3rd, 5th, 6th, and 7th, causes of action.
Dated: October _____, 2022
Hon. Monica Bachner
Judge of the Superior Court