Escolar Documentos
Profissional Documentos
Cultura Documentos
DISTRICT OF OREGON
(Portland Division)
CATALINBREAD, LLC,
CaseNo.: 3:18-cv-1795-HZ
Plaintiff,
LR 7-1(a) COMPLIANCE
Pursuant to Local Rule 7-1(a), counsel for defendants Scott Miller, Howard Gee, and
Boris Lutskovsky (collectively, "defendants") made an unsuccessful good faith effort through a
MOTIONS
Defendants move to dismiss plaintiff s First and Third Claims for Relief with prejudice
pursuant to Federal Rules of Civil Procedure 12(b)(6),8(a) and 9(b), and Plaintiffls Second,
Fourth, Fifth, Sixth, Seventh, and Eighth Claims for Relief pursuant to 28 U.S.C. $ 1367(c)(3),
with leave to refile in state courl. In the alternative, defendants move to strike paragraphs a.5 and
a.6 of plaintiff s prayer for relief pursuant to Federal Rule of Civil Procedure 12(f). These
motions are based on plaintiff s First Amended Complaint, and the following memorandum.
MEMORANDUM OF AUTHORITIES
I. INTRODUCTION.
Plaintiff claims that in October of 2017 , defendants misused company resources and
plotted to form a competing business while still on its payroll. Now, more than ayear later,
plaintiff asks the court for a sweeping and highly anticompetitive permanent injunction
prohibiting defendants from ever again "[o]wning, managing or being employed by any business
engaged in the sale or distribution of guitar pedals." Plaintiff does not allege that any defendant
is contractually obligated not to compete, and the requested relief is not authorized by any of the
statutes plaintiff invokes. In fact, the Defend Trade Secrets Act ("DTSA") specifically prohibits
an injunction that would "prevent a person from entering into an employment relationship." i 8
U.S.C. S 1836(bX3XA). The complaint does not tether plaintiff s extraordinary request to any
legitimate business interest, and it appears to be included for purely punitive reasons.
Critically, plaintiff does not allege that defendants ever actually used any of its alleged
"trade secrets" in commerce, or that they disclosed plaintiff s alleged trade secrets to any third
defendants are secretly plotting to do so at some unknown future time. Tellingly, however,
plaintiff waited almost year after the alleged events at issue to file this lawsuit. Moreover,
plaintiff has never moved for a temporary restraining order or a preliminary injunction. Put
simply, plaintiff has not acted with any of the urgency that one would expect given its highly
When plaintiff eventually filed the original complaint on October 9,2018, it omitted the
most basic facts to support its claims under the DTSA and the Computer Fraud and Abuse Act
("CFAA"). For example, plaintiff did not allege what "trade secrets" defendants allegedly
misappropriated. Nor did the complaint explain how the alleged theft injured plaintiff. This
omission is not surprising, given that plaintiff did not (and cannot) allege that defendants ever
actually formed a competing business or used any of the allegedly stolen trade secrets in
commerce. After defendants provided plaintiff with a draft motion to dismiss, plaintiff agreed to
Plaintiff filed the First Amended Complaint on January 25,2019. Notably, because the
First Amended Complaint sounds in fraud, plaintiff must satisfy both FRCP 8's notice pleading
standard and FRCP 9(b)'s heightened particularity requirement. Kearns v. Ford Motor Co., 567
F.3d 1 120, 1125 (9th Cir.2009) (pleading "as a whole" must satisfy Rule 9(b) where, as here,
plaintiff s claims are based on an alleged "unified course of fraudulent conduct"). Yet despite
two pleading attempts and more than a year to conduct its internal investigation, plaintiff still
cannot identify a single document that any defendant is accused of actually misappropriating.
Nor does the First Amended Complaint allege that defendants ever competed with plaintiff at all,
let alone that they used plaintiff s vaguely defined "trade secrets" for that purpose. Finally,
plaintiff inexplicably continues to insist that defendants violated the CFAA by using its
computers for an improper purpose, despite the Ninth Circuit's clear instruction that the Act
o'does
not extend to violations of use restrictions ." United Stqtes v. Nosal, 676 F .3d 854,863-64
I{AGLUND KELLEYLLP
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(9th Cir. 2012) (en banc); see also LVRC Holdings LLC v. Brekka,58l F.3d II27 (9thCir.2009)
(same).
The bottom line is that despite ample opportunity, plaintiff cannot state a plausible claim
against any defendant under either the DTSA or the CFAA. Because further amendment would
be futile, these claims should be dismissed with prejudice. Plaintiff s remaining state law claims
Each of the four defendants' employment with plaintiff ended no later than October 26,
2017. Compl. fll] 3-6. With one exception, all of the alleged events occurred on or before that
date.r Plaintiff did not file this lawsuit until almost ayeffi later, on October 9,2018. During that
time, plaintiff had every opportunity to investigate its claims, conduct any necessary forensic
examination of its systems, and determine exactly what proprietary information (if any) it had a
legitimate reason to believe that defendants misappropriated. Yet plaintiff s original complaint
did not even identify what plaintiff s o'trade secrets" were (let alone what trade secret any
individual defendant was accused of taking and how they used the trade secret to plaintiff s
detriment), apart from va'gue references to "proprietary information" and "secret sauce." After
defendants provided plaintiff with a courtesy copy of a draft motion to dismiss, plaintiff
On January 25,2018, plaintiff filed the First Amended Complaint. Notably, plaintiff now
admits that a competitor could "reverse engineer" its "parts lists," "circuit boards, "signal flow"
and other elements of plaintiff s products. Id. n 14. Plaintiff s candid admission that someone
within the industry could ascertain its supposedly proprietary information through reverse
engineering casts serious doubt on whether some or all of plaintifls alleged trade secrets are
even protected by the DTSA. As relevant to this motion, this ambiguity underscores how critical
it is that plaintiff allege what exactly defendants are accused of misappropriating and how they
used it, in order to put defendants on notice of the scope of plaintiff s claim and give them a fair
opportunity to prepare a defense. Yet like its predecessor, the First Amended Complaint omits
multiple key facts that are necessary to state a plausible DTSA or CFAA claim. These missing
a What specific "proprietary and secret" information defendants are accused of'actually
misappropriating;
a Whether defendants ever formed a business, competed with plaintiff, or captured any
of plaintiff s customers using its trade secrets. In other words, the First Amended
Complaint does not allege how defendants' purported misappropriation of plaintiff s
trade secrets caused its injury; and
Rather than plead the required facts, plaintiff relies on o'Slack" conversations in which
defendants allegedly discussed all of the ways they 'ointended" to harm plaintiff. But defendants'
mere intent, however provocative, does not give plaintiff a cause of action under the DTSA or
the CFAA. Instead, despite every opportunity to plead its best case, plaintiff cannot identify a
single proprietary document that it claims was actually misappropriated by any one of the four
defendants. Nor does plaintiff allege that any defendant has ever competed with plaintiff, with or
without using its supposed trade secrets. Finally, plaintiff does not plead a single fact plausibly
suggesting that any defendant has ever accessed its computers without authorization or in excess
complaint must contain sufficient facts to "state a claim to relief that is plausible on its face."
Bell Atl. Corp. v. Twombly,550 U.S, 544,570 (2007). Federal Rule of Civil Procedure 8
v. Iqbal,556 U.S. 662, 678 (2009). Thus, a complaint that is limited to 'olabels and conclusions"
or a "formulaic recitation of the elements of a cause of action" will not survive a motion to
Although the Court must accept plaintifls well-pled factual allegations as true, the Court
should not accept as true "allegations that are merely conclusory, unwarranted deductions of fact,
2001). Nor should the court accept "legal conclusions cast in the form of factual allegations if
those conclusions cannot reasonably be drawn from the facts alleged." Clegg v. Cult Awareness
Allegations of fraud, or that sound in fraud, must be pled with particularity. Fed. R. Civ.
P. 9(b); Vess v. Ciba-Geigy Corp. USA,317 F.3d 1097 , 1107 (gth Cir. 2003). The purpose of
Rule 9(b) is to provide defendants adequate notice of the alleged wrong, and a fair opportunity to
defend against plaintiff s claim. Concha v. London,62F.3d 1493, 1502 (9th Cir. 1995). Thus,
even if fraud is not a necessary element of plaintifls claim, Rule 9(b) nonetheless applies where
plaintifls claims are based on a "unified course of fraudulent conduct." Keerns v. Ford Motor
Co.,567 F.3d 1720,II25 (9th Cir. 2009). In such cases, plaintiff s claims are said to o'sound in
fraud," and the complaintooas a whole must satisfy the particularity requirement of Rule 9(b)."
Id.
ry. ARGUMENT.
A. Defendants Did Not Violate the CFAA bv Alleeedly Abusine Their Access to
Plaintiffs Computers.
The Computer Fraud and Abuse Act, 18 U.S.C. $ 1030 et seq., prohibits the use of
protected computers "without authorization" or in a manner that "exceeds authorized access." .Id.
Congress passed the CFAA to address the problem of computer hacking. Ticketmaster L.L.C. v.
Prestige Entm't, lnc.,306 F. Supp. 3d 1164,Il74-1175 (C.D. Cal.2018). Although the Act also
creates a private civil cause of action under limited circumstances, it is o'primarily a criminal
statute." LVRC Holdings LLC v. Brekka,58l F.3d 1127,1134 (gth Cir.2009). Accordingly,
courts in this circuit construe the Act narrowly. Id. (statutes with both criminal and noncriminal
In Brekka, which involved facts that are analogous to this case, the Ninth Circuit held
explicitly that the Act does not apply to an employee who abuses his or her access to an
Id. at 1135. Brekka also held that defendant had not "exceeded" his authorization by accessing
the plaintiff employer's computer to aid his competing business. Thus, the Court explained
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Id. at135,n.7.
A full panel of the Ninth Circuit reaffirmed Brekka three years later in United States v.
Nosal, 676 F.3d 854 (9th Cir.2012) (en banc). In Nosal, which also involved alleged
access' in the CFAA is limited to violations of restrictions on access to information," and "does
not extend to violations of use restrictions." Id. at 863-864 (emphasis in original). After Brekka
and Nosal, it is settled law in this circuit that an employee does not violate the CFAA simply by
The gravamen of plaintiff s CFAA claim is, of course, that defendants violated the Act by
Compl. 'tf 69 (emphasis added). Even if this allegation were true, it is precisely the activity that
the Ninth Circuit held unequivocally in Brekka and Nosal does not violate the Act.
After defendants put plaintiff on notice of Brekka and Nosal, plaintiff made the following
Compl. fl 41. Plaintiff also alleges that defendants "accassed and altered data on a computer"
o'Bryan" after Bryan no longer worked for plaintiff. Compl.
belonging to someone named '!i35
Plaintifls vague new allegations are insufficient to state a CFAA claim for at least two key
TEASONS
First, the mere fact that "someone" may have tried to access plaintifls computers does
not permit a reasonable inference that defendants, as opposed to any other random person with
an internet connection, were responsible. Plaintiff does not allege, for example, that the would-be
hacker attempted to access its computer using defendants' former login credentials, or from an IP
address associated with defendants' known location. Plaintiff does not even explain when the
attempted hack occurred, other than that it was sometime between the end of defendants'
employment and the filing of the First Amended Complaint more than a year later. Plaintiff s
rank speculation that defendants are responsible for the alleged attempted hack on its system
does not satisfy the pleading standard announced in Twombly, and it falls far short of Rule 9's
hei ghtened particularity requirement.
Second, and just as significant, plaintiff does not allege whether the "attempted" hack
was even successful. This omission is critical because in order to sustain its CFAA claim
plaintiff must plausibly allege that defendants leveraged the hack to obtain or destroy something
of value. 18 USC $$ 103O(o)(4XAX1XI), (g) (authorizingprivate civil action for economic
damages where violation results in aggregate loss of at least $5,000). Absent an allegation that
the would-be hacker actually accessed plaintiff s computer and used that access to do damage,
there is no basis to conclude that anybody, much less any defendant, is liable to plaintiff under
the Act.
Finally, the allegations about "Bryan" show at most that Bryan lacked access to the
computer, not defendants. The supposed access to his computer is alleged to have occurred while
defendants still worked for plaintiff. Moreover, while defendants are alleged to have discussed
wiping Bryan's computer, there is no allegation that they actually did so, or even that Bryan's
computer belonged to plaintiff.
In sum, Brekka and Nosal are controlling, and compel dismissal of plaintiff s CFAA
claim. To the extent plaintiff now claims that defendants accessed its computers after their
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employment ended, its allegations do not satisfy Twombly, and fall far short of meeting Rule
9(b)'s particularity requirement. See Oracle Am., Inc. v. Serv. Key, LLC, No. C 12-00790 SBA,
2012WL 6019580, at *6 (N.D. Cal. Dec. 3,2012) (CFAA claim subject to Rule 9(b)).
Accordingly, plaintifls CFAA claim should be dismissed.
To state a misappropriation claim under the DTSA, plaintiff must allege facts that, if true,
(1) that it is the owner of a trade secret; (2) that the defendant misappropriated
the trade secret; and (3) that it was damaged by the defendant's actions.
The term "trade secret" as used in the Act, is limited to information that "derives
independent economic value . . . from not being generally known to, and not being readily
ascertainable throuqh proper means by, another person who can obtain economic value from the
disclosure or use of the information." 18 USC $ 1839(3) (emphasis added). Thus, to state a
claim, the complaint must "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 persons
who are skilled in the trade." Alta Devices, Inc.,2018 WL 5045429, at *8 (quoting Vendavo, Inc.
v. Pricef(x) lG, No. 17-cv-06930-RS, 2018 WL 1456697, at *4 Qt{.D. Cal. Mar. 23,2018).
Plaintiff has not adequately pled any element of its DTSA claim.2 First, a vague "high-
level overview of [the] purported trade secrets" that defendants allegedly stole is, at best, all that
the complaint contains. Id. To be sure, the complaint describes as a general matter what
categories of information plaintiff counts among its "trade secrets." Compl. fl 13. But despite
repeated conclusory references to "proprietary development parts," and "proprietary and secret
information," plaintiff does not allege which of these secrets defendants are accused of actually
information" they are accused of stealing, or whether that information is even protected by the
Act. See 18 USC $ 1839(3XB) (information that is generally known or readily ascertainable
within the industry is not atrade secret); see also Compl. $ 14 (admitting that many of plaintiff s
Second, the material allegations in support of plaintiff s DTSA claim are not directed at
any of the four named defendants in particular. Mr. Miller, for example, has no way of knowing
what (if any) proprietary information he is personally accused of taking. In fact, none of the
defendants are in a fair position to determine whether they are accused of misappropriating all of
plaintiff soosecret information," or some of it, or none of it. In other words, the complaint does
not put any defendant on notice of the scope of the DTSA claim against him in terms of how he
took, used, or disclosed the purported trade secrets. See Space Data Corp.,2017 WL 5013363,
2 The complaint fails to meet even the basic demands of Rule 8(a). Importarrtly, because
plaintiff claims that defendants misappropriated its "trade secrets" by way of misrepresenting
their intentions to continue working at Catalinbread, these allegations must (but do not) also
satisfy the more stringent requirements of Rule 9(b). See Kearns,567 F.3d at 1125.
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Finally, the complaint fails to explain how defendants' alleged acquisition of plaintiff s
trade secrets caused its injury. It may be true that plaintiff has "incurred substantial and near
terminal losses in revenue" since Burkett took over control of the company. But nothing in the
complaint indicates that defendants' alleged misappropriation - rather than, for instance, new
ownership's complete lack of industry experience and alienation of key employees - caused
plaintiff s losses. In fact, despite filing its First Amended Complaint more than ayear after
defendants left the company, plaintiff does not (and cannot) allege that defendants have ever
competed with it at all. Critically, plaintiff does not allege a single instance in which defendants'
used its trade secrets to sell a competing product or divert even one customer. This lack of any
causal connection between the challenged conduct and plaintiff s alleged injury simply cannot be
squared with plaintiffls $200,000 damages claim. See 18 U.S.C. $ 1836(bX3)(B) (allowing an
In short, plaintiff s DTSA claim is based on precisely the sort of "unadorned, the-
cautioned against. Iqbal,556 U.S. at 678. Plaintiff s claim should be dismissed accordingly.
Although leave to amend is ordinarily freely granted, "[a] district court does not err in
denying leave to amend where the amendment would be futile." Gardner v, Martino,563 F.3d
981, 990 (9th Cir. 2009).In this case, the Court should deny plaintiff leave to amend its DTSA
and CFAA claims a second time. Plaintiff did not file this lawsuit until almost ayear after the
events at issue. During that time, plaintiff had every opportunity to investigate this case and
discover the basic facts necessary to support its claims, if they existed. Yet despite two pleading
tries and fair notice from defendants of the original complaint's deficiencies, plaintiff has not
met its burden. Under these circumstances, "there is no need to prolong the litigation by
permitting further amendment." Chaset v. Fleer/Slqtbox Int'|, LP,300 F.3d 1083, i088 (9th
Cir.2002). Accordingly plaintifls DTSA and CFAA claims should be dismissed with prejudice.
The only jurisdictional basis that plaintiff pleads in relation to its state law claims is the
Couft's supplemental jurisdiction pursuant to 28 U.S.C. $ 1367. Compl. fl 7. Where "the district
court has dismissed all claims over which it has original jurisdiction," it may decline to exercise
supplemental jurisdiction over remaining state law claims. 28 U.S.C. $ 1367(c)(3); See, e.g.,
Parrav. PacifiCare of Ariz., Inc.,715 F.3d 1746,7156 (9th Cir.2013). Moreover, "'thevalues
ofjudicial economy, convenience, fairness, and comity' generally weigh in favor of dismissal in
such circumstances." McNair v. Oregon, No. 2:16-CV-00709-SB, 2018 WL 2208208, at*4 (D.
Or. May 14,2018) (quoting Mine Workers v. Gibbs, 383 U.S. 715,726-27 (1966)).In this case,
at the outset of the litigation before discovery has even begun, dismissal of plaintiff s state law
alternative, however, subsections a.5 and a.6 of plaintiff s prayer should be stricken pursuant to
Federal Rule of Civil Procedure 12(f). Id. (the Court may strike from a pleading any immaterial
or impertinent matters). Subsections a.5 and a.6 of plaintiff s prayer for relief seek a sweeping
and blatantly anticompetitive injunction that would forever prohibit defendants from
participating or being employed in the guitar pedal business. The injunction is not authorizedby
any of the statutes plaintiff invokes; is not supported by contract or limited in either geographic
or temporal scope; and is plainly contrary to public policy favoring freedom of employment.3
Worse, plaintiff does not identify any legitimate remedial purpose this relief could possibly
serve. Instead, this aspect of the injunction appears intended to serve a purely punitive function.
Plaintiff s demand that the Court permanently restrain defendants from plying their
chosen trade, without any legal or factual basis, smacks of a bad faith attempt to leverage this
case to restrain legitimate competition. Defendants are not seeking attomeys' fees in connection
with this motion. Defendants note, however, that the DTSA authorizes a fee award where
plaintiff brings a misappropriation claim in bad faith, and they reserve the right to invoke that
provision at alater time should this case proceed through discovery to summary judgment. In
any event, the punitive relief requested in sections a.5 and a.6 has no basis in law, clearly
violates sound public policy, and squarely contradicts the plain text of the DTSA. The offensive
sections of plaintiff s prayer for relief should be stricken. Fed. R. Civ. P. 12(f).
3
In fact, the DTSA specifically prohibits an injunction that would "prevent a person from
entering into an employment relationship," U.S.C. $ 1836(b)(3)(A).
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V. CONCLUSION.
For all of the foregoing reasons, the Court should dismiss the First Amended Complaint.
In the alternative, sections a.5 and a.6 of plaintiff s prayer for relief should be stricken.
s/Christonher I
Christopher Lundberg, OSB No. 941084
clundberg@hk-law.com
200 SW Market Street, Ste.1777
Portland, OR97267
(s03) 22s-0777
CERTIFICATE OF SERVICE
I hereby certify that on the 8th day of January,2079, I served the foregoing Motion to
Aaron J. Cronan
Cronan Law LLC
4207 SE Woodstock Blvd., No. 440
Portland, OR97206
aaron@aaroncronanlaw. com
Attorney for Plaintiff
Jon P. Stride
Tonkon Torp LLP
888 SW Fifth Avenue, Ste. 1600
Portland, OR97204
j on.stride@tonkon,com
by mailing a full, true and correct copy thereof in a sealed first-class postage prepaid envelope,
addressed to the foregoing attorney at the last known office address ofthe attorney, and deposited
with the United States Post Office at Portland, Oregon on the date set forth above.
by causing a full, true and correct copy thereofto be hand delivered to the attorney at the last
known address listed above on the date set forth above,
n by sending a full, true and correct copy thereof via overnight mail in a sealed, prepaid envelope,
addressed to the attorney as shown above on the date set forth above.
by faxing a full, true and correct copy thereof to the attorney at the fax number shown above,
which is the last-known fax number for the attorney's office on the date set forth above.
by transmitting full, true and correct copies thereof to the attorneys through the court's Cm/ECF
system on the date set forth above.
s/Christopher Lundbere
Christopher Lundberg, OSB No. 941084
Attorneys for Defendants Miller, Gee and Lutskovsky