Banawis-Olila v. World Courier Ground, Inc. et al

Filing 49

Order by Hon. Phyllis J. Hamilton denying 43 Motion to Dismiss Counterclaims.(pjhlc2S, COURT STAFF) (Filed on 11/4/2016)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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OBIE BANAWIS-OLILA,

v.

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Case No. 16-cv-00982-PJH

Plaintiff,

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ORDER DENYING MOTION TO
DISMISS COUNTERCLAIMS

WORLD COURIER GROUND, INC., et
al.,

Re: Dkt. No. 43

Defendants.
United States District Court
Northern District of California

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Before the court is plaintiff Obie Banawis-Olila’s motion for partial dismissal of

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defendant’s counterclaims. Dkt. 43. The matter is fully briefed and suitable for decision

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without oral argument. Accordingly, the hearing set for November 16, 2016 is VACATED.

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Having read the parties’ papers and carefully considered their arguments and the

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relevant legal authority, and good cause appearing, the court hereby DENIES the motion,

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for the following reasons.
BACKGROUND

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A.

Procedural History
This is an employment dispute that was removed from state court on the basis of

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diversity. Banawis-Olila worked as a dispatcher for defendant World Courier Ground, Inc.

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(“WCG”) from 1998 until her resignation in September 2015. Dkt. 39, Second Amended

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Complaint (“SAC”) ¶ 1. In the operative complaint, Banawis-Olila asserts six causes of

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action against WCG: (1) violation of the California Equal Pay Act, Cal. Labor Code

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§ 1197.5 (“the EPA claim”); (2) failure to provide rest periods, in violation of Cal. Labor

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Code § 226.7; (3) failure to provide duty-free meal periods, in violation of Cal. Labor

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Code § 226.7; (4) failure to pay overtime compensation, in violation of Cal. Labor Code

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§ 1198; (5) violation of Cal. Bus. & Prof. Code § 17200; and (6) failure to pay “waiting

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time penalties” required by Cal. Labor Code § 203. SAC ¶¶ 6–36.

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On May 23, 2016, the court entered an order granting defendants’ motion to

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dismiss the original complaint. See Dkt. 25. The court dismissed all claims against

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former defendant Amerisourcebergen Corporation (“ABC”), the EPA claim, a constructive

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discharge claim, and a number of claims based on gender discrimination. Id. at 13.

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Leave to amend was granted with respect to the EPA claim, the discharge claim, and the

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claims against ABC. On June 16, 2014, Banawis-Olila filed her first amended complaint

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(“FAC”). Dkt. 32. The FAC abandoned the discharge claim and the claims against ABC,

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but reasserted the EPA claim.
On July 29, 2016, the court granted a motion to dismiss the EPA claim, but again

United States District Court
Northern District of California

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provided leave to amend to provide sufficient facts comparing the “skill, effort, and

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responsibility” and the “working conditions” of the two positions. Dkt. 38. The second

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amended complaint followed on August 24, 2016, and WCG answered on September 21,

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2016. Dkt. 40.

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B.

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WCG’s answer asserts three counterclaims against Banawis-Olila. The factual

The Allegations in WCG’s Answer

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basis of the counterclaims centers on the events that led to Banawis-Olila’s resignation,

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particularly her alleged involvement in the disappearance of a “missing and valuable

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military package.” Answer ¶ 6.
Bicol’s Operations for WCG Under a Suspended License

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During her employment with WCG, Plaintiff and her husband owned and managed

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a trucking company called Bicol Express, Inc. (“Bicol”). Bicol was one of WCG’s “third-

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party deliverer vendors.” Answer ¶ 8. During work hours, Banawis-Olila used WCG’s

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“time and resources” to conduct work for Bicol. Answer ¶ 11. Banawis-Olila overcharged

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WCG customers when Bicol was the deliverer, to generate extra revenue for her

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business. Answer ¶ 12.

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Bicol’s business license was suspended in March 2015. Banawis-Olila did not

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disclose this fact to her employer, and Bicol continued to deliver for WCG while operating

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under a suspended license. Answer ¶¶ 13, 16. On September 24, 2015, as a result of

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the investigation into the missing package, WCG discovered that Bicol had been

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operating illegally and terminated it as vendor. Answer ¶ 26.

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2.

The Unauthorized Hiring of Jose Gutierrez

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In May 2015, Banawis-Olila purported to hire an individual, Jose Gutierrez, to

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perform delivery services. Answer ¶¶ 14–15. Mr. Gutierrez was not paid for his work,

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despite multiple requests for his paycheck. Answer ¶¶ 17–19. As a result, Gutierrez has
sued WCG for violations of California labor law. Answer ¶ 21. WCG denies that it ever

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Northern District of California

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employed Gutierrez.

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3.

The Missing Military Shipment

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On August 12, 2015, Banawis-Olila informed her supervisor that a shipment had

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been lost. The missing shipment was a “highly sensitive, military product worth tens of

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thousands of dollars.” Answer ¶ 22.
During the ensuing investigation, WCG alleges that Banawis-Olila’s account of

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how the package became missing changed. In her first interview, she claimed that it

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“flew out” of the car when it hit a bump. A “few days later,” on September 23, 2015, she

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claimed that it was “stolen from the back seat of the driver’s car.” Fifteen minutes into the

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second interview, she “abruptly refused to cooperate further and left the facility. During

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the investigation, Plaintiff’s husband, Patricio, told a member of [WCG’s] management

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that he thought Plaintiff was ‘lying.’” Answer ¶ 25.
“The police conveyed to [WCG’s] management its belief that Bicol Express was

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somehow involved and covering up something, however, the package was never

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recovered. Defendant ultimately lost a very large customer from the incident.” Answer

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¶ 27. Banawis-Olila resigned her position on September 28, 2015. Her husband Patricio

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“apparently fled the country for the Philippines.” Answer ¶ 28.

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WCG’s Counterclaims

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Based on the above factual allegations, WCG asserts counterclaims for: (1)

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breach of contract; (2) breach of the duty of loyalty; and (3) violation of Cal. Bus. & Prof.

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Code § 17200. Answer ¶¶ 30–46. The breach of contract claim is based on WCG’s

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“Information Security Policy,” in which plaintiff promised to safeguard’s WCG’s

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information and not to use WCG resources for “illegal [and] unethical” acts or to conduct

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“personal business using company resources.” Answer ¶ 11. The first counterclaim is

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not challenged in plaintiff’s motion to dismiss.
The second counterclaim alleges breaches of the duty of loyalty that Banawis-Olila

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owed to her employer. Answer ¶ 36. The specific breaches alleged are: (a) using

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Northern District of California

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WCG’s resources to perform work for Bicol; (b) refusing to cooperate and making

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material misrepresentations during the investigation into the missing package; (c)

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fraudulently hiring Gutierrez as a WCG employee without WCG’s authorization; and (d)

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engaging in an unauthorized scheme to overcharge certain customers of WCG to benefit

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Bicol. Answer ¶ 37. The third counterclaim, alleging violations of the California Unfair

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Competition Law (the “UCL claim”), is based on “Plaintiff’s common law violations.”

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Answer ¶ 43.

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Banawis-Olila now brings a motion to dismiss WCG’s second and third

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counterclaims as preempted by the California Uniform Trade Secrets Act (“CUTSA”).
DISCUSSION

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A.

Legal Standard
The California Uniform Trade Secrets Act was intended “to occupy the field of

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trade secret liability to the exclusion of other civil remedies.” Silvaco Data Sys. v. Intel

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Corp., 184 Cal. App. 4th 210, 234 (2010). CUTSA therefore “preempts common law

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claims that are based on the same nucleus of facts as the misappropriation of trade

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secrets claim for relief.” K.C. Multimedia, Inc. v. Bank of Am. Tech. & Operations, Inc.,

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171 Cal. App. 4th 939, 958 (2009) (quotation omitted). However, CUTSA does not

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preempt “(1) contractual remedies, whether or not based upon misappropriation of a
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trade secret,” and “(2) other civil remedies that are not based upon misappropriation of a

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trade secret.” Cal. Civil Code § 3426.7(b)(1)–(2). Thus, for non-contractual civil

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remedies, the issue is whether “the gravamen of the wrongful conduct asserted . . . is the

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misappropriation of trade secrets.” K.C. Multimedia, 171 Cal. App. 4th at 961; accord E-

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Smart Techs., Inc. v. Drizin, No. C 06-05528 MHP, 2009 WL 35228, at *6 (N.D. Cal. Jan.

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6, 2009).

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B.

The specific wrongdoing that WCG alleges in support of its duty of loyalty claim is

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Analysis

laid out explicitly in the Answer: (1) Banawis-Olila used WCG’s resources to perform work
for Bicol; (2) Banawis-Olila made misrepresentations during the investigation into the

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United States District Court
Northern District of California

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missing package; (3) Banawis-Olila fraudulently hired Gutierrez without authorization;

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and (4) Banawis-Olila overcharged certain customers of WCG to benefit Bicol. Answer

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¶ 37. Quite simply, none of these alleged breaches is “based upon” the misuse of

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WCG’s trade secrets or other confidential information. Cal. Civil Code § 3426.7(b)(2).

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Therefore, WCG’s second counterclaim is not preempted. See Leatt Corp. v. Innovative

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Safety Tech., LLC, 2010 U.S. Dist. LEXIS 71362, at *17–*22 (S.D. Cal. July 15, 2010)

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(denying motion to dismiss claims as preempted by CUTSA when the claims “are based

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on more than just the misappropriation of Plaintiffs’ trade secrets”).1
Seeking to avoid this straightforward result, plaintiff relies primarily on Mattel, Inc.

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v. MGA Entertainment, Inc., 782 F. Supp. 2d 911 (C.D. Cal. 2011). The issue in Mattel

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was whether CUTSA “supersedes claims based on the misappropriation of confidential

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information, whether or not that information meets the statutory definition of a trade

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secret,” a question that the court answered in the affirmative. 782 F. Supp. 2d at 986.

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Thus, although Mattel holds that misappropriation of a trade secret is not a “prerequisite”

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The second counterclaim does include an allegation that “Plaintiff was an employee of
Defendant, entrusted by Defendant with its trade secrets.” Answer ¶ 36. However, this
appears to be for the purpose of establishing that Banawis-Olila owed WCG a duty of
loyalty. The specific breaches of the duty listed in paragraph 37 of the Answer do not
allege the misuse of confidential information.
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to CUTSA preemption, the claims at issue in Mattel still concerned “the misappropriation

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of information.” See id. By contrast, the breaches alleged in WCG’s second

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counterclaim have nothing to do with the misuse of confidential information, whether a

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trade secret or not.

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WCG’s UCL claim is derivative of its first and second counterclaims. Answer ¶ 43.

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The “unlawful” prong of the UCL “borrows violations of other laws and treats them as

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unlawful practices that the [UCL] makes independently actionable.” Cel-Tech Commc’ns,

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Inc. v. Los Angeles Cellular Tel. Co., 20 Cal. 4th 163, 180 (1999) (quotations omitted).

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Because the court has held that the second counterclaim is not preempted, the UCL
claim survives as well, to the extent that the counterclaim is premised on wrongdoing that

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United States District Court
Northern District of California

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is not the misappropriation of confidential information.
CONCLUSION

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Because WCG’s counterclaims are not based upon the misappropriation of trade
secrets, plaintiff’s motion to dismiss the counterclaims is DENIED.
IT IS SO ORDERED.
Dated: November 4, 2016

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__________________________________
PHYLLIS J. HAMILTON
United States District Judge

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