Cisco Systems, Inc. et al v. Chung et al

Filing 97

ORDER REGARDING 40 41 43 45 54 MOTIONS TO COMPEL ARBITRATION, STAY THE CASE, AND DISMISS by Judge Phyllis J. Hamilton.(pjhlc2S, COURT STAFF) (Filed on 5/26/2020)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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CISCO SYSTEMS, INC., et al.,

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United States District Court
Northern District of California

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Case No. 19-cv-07562-PJH

Plaintiffs,

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v.

WILSON CHUNG, et al.,
Defendants.

ORDER RE MOTIONS TO COMPEL
ARBITRATION, STAY THE CASE,
AND DISMISS
Re: Dkt. Nos. 40, 41, 43, 45, 47, 54, 57,
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Before the court are defendant Jedd Williams’ (“Williams”) motion to compel

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arbitration and stay the case or, in the alternative, motion to dismiss (Dkt. 41), defendant

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Wilson Chung Ph.D.’s (“Chung”) motion to dismiss and joinder to Williams’ motions (Dkt.

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43), defendant Plantronic Inc.’s (“Plantronics” or “Poly”) motion to dismiss (Dkt. 40) and

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joinder to Williams’ and Chung’s motions (Dkt. 47), defendant Thomas Puorro’s

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(“Puorro”) motion to dismiss and joinder to his co-defendants’ respective motions (Dkt.

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45), and defendant James He’s (“He”) motion to dismiss and joinder to Williams’ motion

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to compel arbitration (Dkt. 54) (collectively, “defendants”).

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

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relevant legal authority, and good cause appearing, the court hereby GRANTS Williams’

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motion to compel arbitration and stay the instant litigation with respect to the claims

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against him, TERMINATES his alternative motion to dismiss, and DENIES his motion to

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stay with respect to the claims against the remaining defendants. Additionally, the court

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GRANTS Chung’s and He’s motions to dismiss and GRANTS IN PART and DENIES IN

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PART Puorro’s and Plantronic’s motions to dismiss.

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BACKGROUND
This action concerns the alleged misappropriation of Cisco Systems, Inc.’s and

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Cisco Technology, Inc.’s (collectively, “plaintiff” or “Cisco”) purported trade secrets. At

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core, plaintiff alleges that its former employees schemed with a competitor, Plantronics,

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to improperly reveal a range of its purported trade secrets.

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A.

The Underlying Claims
Plaintiff filed its initial complaint on November 18, 2019. Dkt. 1. On December 17,

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2019, plaintiff filed the operative pleading in this action, its First Amended Complaint

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(“FAC”). Dkt. 25. In it, plaintiff alleges claims for the following:

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•

and California state law (Cal. Civ. Code § 3426) against Chung. FAC ¶¶ 197-

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226.

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United States District Court
Northern District of California

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•

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•

•

•

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Misappropriation of trade secrets under both federal and California state law
against Plantronics. Id. ¶¶ 314-41.

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Intentional interference with a contractual relationship under California state
law against Puorro. Id. ¶¶ 307-313.

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Misappropriation of trade secrets under both federal and California state law
against Puorro. Id. ¶¶ 283-306.

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Misappropriation of trade secrets under both federal and California state law
against Williams. Id. ¶¶ 256-82.

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Misappropriation of trade secrets under both federal and California state law
against He. Id. ¶¶ 227-55.

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Misappropriation of trade secrets under both federal (Title 18 U.S.C. § 1836)

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Intentional interference with a contractual relationship under California state
law against Plantronics. Id. ¶¶ 342-44.

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Except Chung, plaintiff seeks both monetary and injunctive relief against all

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defendants. FAC, Prayer for Relief. Plaintiff seeks only injunctive relief against Chung.

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Id. ¶¶ 220, 226.

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B.

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The Parties and an Overview of Defendants’ Alleged Misconduct
a.

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Plaintiff

Plaintiff is a California corporation that designs, engineers, manufactures, and

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Factual Background1

sells software, hardware, and other electronic devices. FAC ¶ 2.
b.

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Plantronics

Plantronics is a Delaware corporation with its principal place of business in Santa

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Cruz, California. Id. ¶ 12. Plantronics is “in the IP telephone, headset, video, and

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collaboration space” and is a market competitor to plaintiff. Id.
c.

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Chung served as a Principal Engineer in plaintiff’s Unified Communications

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United States District Court
Northern District of California

Chung

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Technology Group (“UCTG”). Id. ¶ 26. Chung’s responsibilities included developing

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plaintiff’s collaboration products, including “IP telephony solutions and audio headsets.”

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Id. Incidental to his role, Chung had access to “some of Cisco’s most confidential trade

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secrets used within the UCTG, including design specifications, schematics, source code,

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product market analyses, and vendor contract details.” Id.

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Chung formally departed plaintiff’s employment on February 28, 2019, id. ¶ 62, but

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began working for Plantronics on February 26, 2019, id. ¶ 69. As part of his employment

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with plaintiff, Chung received two laptops, a Lenovo and a MacBook. Chung returned his

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Lenovo laptop on February 27, 2019, id. ¶ 77, but, at least as of September 27, 2019, did

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not return his MacBook laptop, id. ¶ 95.
Plaintiff alleges a series of instances between February 3, 2019 and at least March

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8, 2019 in which Chung downloaded, copied, or emailed various plaintiff’s documents

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and files concerning certain technological and business subject matter to multiple

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external devices not owned by plaintiff. Id. ¶¶ 36-80. Such subject matter includes

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“Cisco’s contribution to 5G technology . . . and design specification of a pre-release video

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For purpose of this motion, the court recounts plaintiff’s well-pled allegations as true.
The court will specify any FAC paragraph cited that is alleged on “information and belief.”
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conferencing display prototype,” id. ¶ 36, source code for debugging a user interface, id.

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¶ 41, pre-release video conferencing display prototypes, id. ¶ 42, design details and

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specifications related to plaintiff’s sound bar products, id. ¶ 45 (alleged on information

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and belief), over 100 webinar presentations relating to plaintiff’s communications product

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portfolio, id. ¶ 65 (alleged on information and belief), a presentation detailing strategy and

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costs for a pre-release video conferencing display product, id. ¶ 51 (alleged on

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information and belief), plaintiff’s marketing position in the collaboration space, id. ¶ 64,

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and “component specifications and competitive differentiators” for plaintiff’s current and

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unreleased hardware products, id. ¶ 74.

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Chung used at least six different external devices to improperly download or

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Northern District of California

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transfer the subject information. Id. ¶ 37 (First Seagate Drive), ¶ 42 (Second Seagate

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Drive), ¶ 44 (SanDisk Drive), ¶ 39 (Samsung Drive), Chung’s personal email account, id.

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¶¶ 64, 80, and his corporate email account at Plantronics, id. ¶ 80. At the time of his

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departure from plaintiff’s employment, Chung did not provide plaintiff the four external

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drives. Id. ¶ 77. Chung accessed at least three specific documents (the “EA Document,”

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the “Webex Vision Document,” and the “Cisco collaboration roadmap document”) during

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his employment at Plantronics. Id. ¶ 86.

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As a condition of his employment, Chung signed a Proprietary Information and

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Inventions Agreement (“PIIA”), which, among other things, prohibited him from

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maintaining simultaneous employment with any industry competitor, barred him from

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removing any plaintiff information except as necessary to perform his employment duties,

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and required that he return all plaintiff information upon termination of his employment.

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Id. ¶ 93. Revealed in the parties’ briefing, Chung maintained an arbitration agreement

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(“Chung Arbitration Agreement”) with plaintiff. Dkt. 50-3 at 2-5.

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d.

He

He served as an engineer. Id. ¶ 97. Incidental to his role, He had access to

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“some of Cisco’s most confidential trade secrets used within Cisco’s UCTG, including

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design specifications, schematics, source code, product market analyses, and vendor
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contract details.” Id. As early as March 2019, Chung began to recruit He to join

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Plantronics. Id. ¶ 99-100. In June 2019, He departed plaintiff’s employment, id. ¶ 114,

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and joined Plantronics on June 24, 2019. Id. ¶ 117 (alleged on information and belief).

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Plaintiff alleges a series of instances between May 13, 2019 and June 20, 2019 in

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which He took photographs of or downloaded plaintiff’s diagrams and documents

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concerning various technological and business subject matter to his iPhone and an

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external drive (the “LaCie drive”). Id. ¶¶ 102-114. Such subject matter includes an

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unreleased headset concept and like prototypes, FAC ¶¶ 103, 105, 109, “vendor

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roadmaps for Cisco’s products,” id. ¶ 109, “an unreleased IP telephone project,” id. ¶¶
112, 118, “full engineering specifications for a next-generation conference room

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Northern District of California

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collaboration device,” id. ¶ 120, emerging business opportunities in the collaboration

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space, id. ¶ 106, and “Cisco’s strategic product development decisions,” id. ¶ 111.

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At the time of his departure, He did not return the LaCie Drive. Id.¶ 115. He

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accessed at least three specific documents (an unreleased IP telephone project

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schematic, a vendor roadmap update, and specification for a next-generation conference

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room collaboration device) during his employment at Plantronics. Id. ¶¶ 118-120.

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He signed his own PIIA, which similarly barred him from removing certain plaintiff’s

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information except as necessary to perform his employment duties and required that he

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return all such information upon termination of his employment. Id. ¶ 126. He did not

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maintain an arbitration agreement with plaintiff.

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e.

Puorro and Williams

Puorro is the Executive Vice President and General Manager of Products at

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Plantronics. Id. ¶ 128. Before joining Plantronics in early 2019, Puorro served as

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plaintiff’s Vice President of its Unified Communications Technology Group between

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October 2014 and December 2018. Id.

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Williams served as a Regional Sales Director and Director in Global Collaboration

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Sales prior to his termination from plaintiff’s employment in October 2019. Id. ¶ 127. In

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the latter role, Williams was responsible for developing strategies to bring plaintiff’s set of
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collaboration products to market. Id.

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Shortly after Puorro’s departure, Williams began to pursue employment at

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Plantronics. Id. ¶ 129. To do so, he reached out to Puorro, who initiated a “scheme” in

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which Puorro would exchange professional coaching and advocacy for his employment at

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Plantronics in exchange for Williams’ provision of “confidential details about Cisco’s

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competitive business.” Id. ¶ 130. Williams received an offer to join Plantronics on

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September 26, 2019. Id. ¶ 176. Between February 2019 and receipt of that offer,

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Williams underwent multiple interviews with various Plantronics executives. Id. ¶ 134

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(March 3-4, 2019 interviews with unidentified “First Poly Executive”); ¶ 147 (April 30,
2019 interviews with other unspecified executives); ¶¶ 152, 155 (June 12, 2019 interview

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Northern District of California

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with other executive); ¶ 158 (June 28, 2019 interviews scheduled with other unspecified

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executives). Williams began his employment at Plantronics on October 14, 2019. Id. ¶

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179.

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Plaintiff alleges a series of communications between Williams, Puorro, and

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unidentified Plantronic executives during the February 2019 to September 2019 period to

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substantiate the alleged scheme. While the court will detail those communications in its

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analysis, Williams allegedly shared information concerning plaintiff’s collaboration

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business, id. ¶¶ 131, 153, a sales strategy named “Project Liberator,” id. ¶ 153,

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unannounced organizational changes (i.e., layoffs), id. ¶¶ 141, 158, plaintiff’s product

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strategy, id. ¶ 156, a sales strategy named “Project x,” id. ¶ 164, and some particular

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product, id. ¶ 169 (actual name redacted in the FAC).

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Williams signed his own PIIA, which required that, absent plaintiff’s consent, he

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maintain the confidentiality of any information concerning plaintiff’s business (actual or

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anticipated) and return all plaintiff information upon termination of his employment. Id. ¶¶

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265-67.2 Williams maintained an arbitration agreement (“Williams Arbitration

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Plaintiff alleges that Williams used a so-called “Time Machine back-up” of his corporate
laptop and, at the time of his termination, failed to return that device. Id. ¶ 187. For
reasons noted below, the court need not consider any information contained within that
back-up device to reach its decisions on the various motions to dismiss at issue.
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Agreement”) with plaintiff. Dkt. 41.

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By September 2019, plaintiff notified both He and Chung of their purported

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misconduct. Id. ¶¶ 89, 122. After receiving notice of their preservation obligations, both

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defendants attempted to conceal the information they purportedly misappropriated by, for

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example, performing Internet searches on how to delete information from certain devices

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without detection, id. ¶ 91 (Chung), and deleting files, id. ¶ 123 (He).
Plantronics conducted its own investigation into the allegations against both

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Pre-Complaint Events

Chung and He. Following each investigation, Plantronics terminated He’s employment,
id. ¶ 124, and placed Chung on administrative leave, id. ¶¶ 95-96. Plantronics reinstated

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United States District Court
Northern District of California

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Chung on November 14, 2019. Id. ¶ 96. Plaintiff filed this action four days later. Dkt. 1.

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C.

The Instant Motions
Plantronics, Puorro, Chung, and Williams respectively filed their motions on

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January 27, 2020. He filed his motion on February 10, 2020. All defendants request

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dismissal under Rule 12(b)(6).
As noted above, Williams’ motion includes a primary request to compel arbitration

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of the claims against him and stay the instant litigation against both him and all

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defendants. After Williams filed his motion, the remaining defendants either filed a

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supplementary notice of joinder to Williams’ compulsion and stay requests with respect to

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the claims respectively against them or indicated such joinder in their briefing. Except

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Chung, who himself maintained an arbitration agreement with plaintiff, all of the non-

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Williams defendants rely upon the Williams Arbitration Agreement in support of their

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joinder requests. The court will analyze the various requests to compel arbitration, stay

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the instant litigation, and dismiss in that order.
DISCUSSION

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A.

Legal Standards

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1.

Motion to Compel Arbitration

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Any party bound to an arbitration agreement that falls within the scope of the
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Federal Arbitration Act (“FAA”), Title 9 U.S.C. §§ 1, et. seq., may bring a motion to

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compel arbitration and stay the proceeding pending resolution of the arbitration. 9 U.S.C.

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§§ 3-4; Lifescan, Inc. v. Premier Diabetic Servs., Inc., 363 F.3d 1010, 1012 (9th Cir.

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2004). The FAA requires the court to compel arbitration of issues covered by the

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arbitration agreement. Dean Witter Reynolds, Inc., v. Byrd, 470 U.S. 213, 218 (1985).

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In ruling on a motion to compel arbitration under the FAA, the district court’s role is
typically limited to determining whether (i) an agreement exists between the parties to

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arbitrate; (ii) the claims at issue fall within the scope of the agreement; and (iii) the

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agreement is valid and enforceable. Lifescan, 363 F.3d at 1012; Chiron Corp. v. Ortho

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Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000). If the answers are yes, the

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United States District Court
Northern District of California

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court must enforce the agreement. Lifescan, 363 F.3d at 1012.

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Regarding whether an agreement exists to arbitrate, the “first principle” that

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underscores the U.S. Supreme Court’s arbitration decisions is that “[a]rbitration is strictly

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a matter of consent, and thus is a way to resolve those disputes—but only those

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disputes—that the parties have agreed to submit to arbitration.” Granite Rock Co. v. Int'l

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B’hd of Teamsters, 561 U.S. 287, 299 (2010); First Options of Chicago, Inc. v. Kaplan,

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514 U.S. 938, 943 (1995). Thus, “a court may order arbitration of a particular dispute only

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where the court is satisfied that the parties agreed to arbitrate that dispute.” Granite

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Rock, 561 U.S. at 297 (emphasis in the original).

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Regarding the validity of the agreement, the FAA provides that arbitration clauses

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“shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in

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equity for the revocation of any contract.” 9 U.S.C. § 2. Thus, state contract defenses

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may be applied to invalidate arbitration clauses if those defenses apply to contracts

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generally. Doctor’s Assocs., Inc. v. Casarotto, 517 U.S. 681, 687 (1996); Circuit City

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Stores, Inc. v. Adams, 279 F.3d 889, 892 (9th Cir. 2002).

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Regarding the scope of the agreement, “any doubts concerning the scope of

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arbitrable issues should be resolved in favor of arbitration.” Moses H. Cone Mem'l Hosp.

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v. Mercury Constr. Corp., 460 U.S. 1, 24–25 (1983). Nevertheless, a motion to compel
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arbitration should be denied if “it may be said with positive assurance that the arbitration

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clause is not susceptible of an interpretation that covers the asserted dispute.” AT&T

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Techs., Inc. v. Commc'n Workers, 475 U.S. 643, 650 (1986).

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2.

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Title 9 U.S.C. § 3 provides that a federal court must stay its proceedings against a

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Motion to Stay

party bound to an arbitration agreement subject to the FAA. 9 U.S.C. § 3.

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Distinct from Title 9 U.S.C. § 3’s statutorily mandated stay, a district court

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maintains authority to enter a stay of litigation as part of its inherent authority to manage

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its own docket. Landis v. N. Am. Co., 299 U.S. 248, 254-55 (1936). The United States
Supreme Court has recognized that such entry may be advisable in litigation involving

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United States District Court
Northern District of California

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mixed arbitrable and non-arbitrable claims but has reiterated that “[t]hat decision is one

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left to the district court . . . as a matter of its discretion to control its docket.” Moses H.

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Cone Mem'l Hosp, 460 U.S. at 21 n.23.

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3.

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A motion to dismiss under Rule 12(b)(6) tests for the legal sufficiency of the claims

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alleged in the complaint. Ileto v. Glock, 349 F.3d 1191, 1199-1200 (9th Cir. 2003). Rule 8

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requires that a complaint include a “short and plain statement of the claim showing that

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the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). Under Rule 12(b)(6), dismissal “is

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proper when the complaint either (1) lacks a cognizable legal theory or (2) fails to allege

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sufficient facts to support a cognizable legal theory.” Somers v. Apple, Inc., 729 F.3d 953,

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959 (9th Cir. 2013). While the court is to accept as true all the factual allegations in the

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complaint, legally conclusory statements, not supported by actual factual allegations,

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need not be accepted. Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009). The complaint

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must proffer sufficient facts to state a claim for relief that is plausible on its face. Bell

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Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 558-59 (2007).

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Rule 12(b)(6) Motion to Dismiss

As a general matter, the court should limit its Rule 12(b)(6) analysis to the

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contents of the complaint, although it may consider documents “whose contents are

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alleged in a complaint and whose authenticity no party questions, but which are not
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physically attached to the plaintiff's pleading.” Knievel v. ESPN, 393 F.3d 1068, 1076 (9th

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Cir. 2005); Sanders v. Brown, 504 F.3d 903, 910 (9th Cir. 2007) (“a court can consider a

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document on which the complaint relies if the document is central to the plaintiff's claim,

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and no party questions the authenticity of the document”). The court may also consider

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matters that are properly the subject of judicial notice, Lee v. City of L.A., 250 F.3d 668,

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688–89 (9th Cir. 2001), exhibits attached to the complaint, Hal Roach Studios, Inc. v.

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Richard Feiner & Co., Inc., 896 F.2d 1542, 1555 n.19 (9th Cir. 1989), and documents

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referenced extensively in the complaint and documents that form the basis of the

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plaintiff's claims, No. 84 Emp'r-Teamster Jt. Counsel Pension Tr. Fund v. Am. W. Holding
Corp., 320 F.3d 920, 925 n.2 (9th Cir. 2003).

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Northern District of California

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B.

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Analysis
1.

Defendants’ Requests to Compel Arbitration
a.

Williams’ Motion to Compel Arbitration

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In support of his motion to compel arbitration, Williams cites the Williams

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Arbitration Agreement. Dkt. 41-2 at 2-3. Plaintiff does not dispute that it and Williams

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entered the Williams Arbitration Agreement and that that agreement remains enforceable.

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In relevant part, the Williams Agreement provides:

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“The Company and I agree to resolve exclusively through
binding arbitration all claims . . . (“claims”), past, present or
future, whether or not arising out of my employment (or its
termination), that the Company may have against me or that I
may have against any of the following: (1) the Company . . .
Examples of claims that we both agree to submit to arbitration
include claims of discrimination, harassment, retaliation,
wrongful termination, unpaid wages, breach of contract,
defamation, and all other claims related to the employment
relationship (or its termination), regardless of whether the claim
is brought by me or the Company.” Dkt. 41-2 at 2.
Plaintiff consented to Williams’ alternative motion to compel arbitration under this

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agreement. Dkt. 53 at 6. Therefore, the court grants Williams’ motion to compel

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arbitration with respect to the claims against him.

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b.

Chung’s Request to Compel Arbitration

In his opening brief, Chung joins in Williams’ motion to compel arbitration. Dkt. 43
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at 12-14. In support of that request, Chung initially argued that the claims against him

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are also subject to the Williams’ Arbitration Agreement because those claims are

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“intimately founded in and intertwined with” that agreement. Id. at 14. In its opposition,

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plaintiff proffered evidence of an arbitration agreement between it and Chung signed

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January 29, 2007 (the Chung Arbitration Agreement referenced above). Dkt. 50-3 at 2-5.

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That agreement includes the following provisions:

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“We agree to arbitrate before a neutral arbitrator any and all
disputes or claims arising from or relating to Employee’s
recruitment to or employment with Cisco, or the termination of
that employment, including claims against any current or former
agent or employee of Cisco, whether the disputes or claims
arise in tort, contract, or pursuant to a statute, regulation, or
ordinance now in existence or which may in the future be
enacted . . . including, but not limited to . . claims for fraud . . .
or breach of contract . . . [and various other employment related
claims].” Dkt. 50-3 at 3 (i.e., “general arbitration agreement
provision”).

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...

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“We understand and agree that nothing in this Agreement shall
prevent either party from seeking from a court the remedy of an
injunction for a claimed misappropriation of a trade secret,
patent right, copyright, trademark, or any other intellectual or
confidential property.” Id. at 4 (i.e., the “intellectual property
injunctive relief carveout”).

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Northern District of California

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...
“We understand and agree that if any term or portion of this
Agreement shall, for any reason, be held to be invalid . . . or to
be contrary to public policy. . . then the remainder of this
Agreement shall not be affected by such invalidity . . . but shall
remain in full force and effect, as if the invalid . . . term or portion
thereof had not existed within this Agreement.” Id. (i.e., the
“severability provision”).
In his reply, Chung contested that this agreement provides a second independent

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basis for this court to compel arbitration of the claims against him. Dkt. 56 at 6-7. The

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court analyzes each of Chung’s arguments below.

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i.

The Chung Arbitration Agreement Does Not Require

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Arbitration of the Claims Against Him

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In his reply, Chung argues that the intellectual property injunctive relief carveout is
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unenforceable because, when considered in light of the general arbitration agreement

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provision, the Chung Arbitration Agreement is ambiguous. Dkt. 56 at 6. In support of

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that argument, Chung cites Comedy Club, Inc. v. Improv West Associates, 555 F.3d 1227

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(9th Circ. 2009) for the proposition that the Ninth Circuit has considered and held

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ambiguous an arbitration provision including a similar carveout for equitable relief. Dkt.

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56 at 6-7.

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United States District Court
Northern District of California

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Chung overstates the relevance of Comedy Club, Inc. here. The arbitration
provision at issue in Comedy Club, Inc. generally provided the following:
“All disputes relating to or arising under this Agreement or the
Asset Purchase Agreement shall be resolved by arbitration in
Los Angeles, California . . .” Id. at 1281.
The provision then added that:
“Notwithstanding this agreement to arbitrate, the parties, in
addition to arbitration, shall be entitled to pursue equitable
remedies and agree that the state and federal courts shall have
exclusive jurisdiction for such purpose and for the purpose of
compelling arbitration and/or enforcing any arbitration award.”
Id.

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On appeal, the parties in Comedy Club, Inc. disputed whether this provision

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allowed the arbitrator authority to adjudicate equitable claims. Id. at 1284. The parties

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advanced two competing interpretations of this provision on that issue: (1) the carveout

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“is explicit that only state and federal courts, and not an arbitrator, have jurisdiction over

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equitable claims”; and (2) that clause “only carved out equitable claims ‘in aid of

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arbitration’ to maintain the status quo between the parties pending arbitration” and it “did

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not supplant the arbitrator’s authority to decide all disputes under the Trademark

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Agreement.” Id. The Ninth Circuit found that a “natural reading of [the carveout] lends

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plausibility” to the second interpretation. Id. at 1285. It reasoned that “[t]he language ‘in

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addition to arbitration’ . . . suggests that arbitration still applies to all disputes, but that in

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addition, the parties are ‘entitled to pursue equitable remedies’ before courts. . . .

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Because the parties included this language, it is plausible and a permissible contract

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interpretation that the equitable claims exception . . . was intended to apply only to claims
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designed to maintain the status quo between the parties.” Id. Giving the benefit of the

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doubt to the “federal presumption in favor of arbitration,” the Ninth Circuit held that the

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agreement “should be interpreted as granting arbitration coverage over ‘all disputes’

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arising from the [underlying agreement at issue].” Id. at 1286.

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The Ninth Circuit’s conclusion in Comedy Club, Inc. does not control this court’s

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interpretation of the intellectual property injunctive relief carveout. The ambiguity issue in

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Comedy Club, Inc. concerned the arbitrator’s authority to adjudicate equitable claims.

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The issue here is whether any such authority conferred to an arbitrator under the general

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arbitration agreement provision deprives plaintiff of its option to have such claims
adjudicated in this court pursuant to the intellectual property injunctive relief carveout.

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Northern District of California

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Stated differently, there is no question here about the arbitrator’s authority to litigate

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equitable claims; rather, the question is whether that authority (contractually allowed

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under the arbitration agreement) creates an ambiguity about this court’s concurrent

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authority to adjudicate the equitable claims contemplated under the intellectual property

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injunctive relief carveout. Based on a plain reading of the relevant provisions in the

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Chung Arbitration Agreement, the answer is no.

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The intellectual property injunctive relief carveout states that “nothing in this

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Agreement shall prevent either party from seeking from a court the remedy of an

19

injunction . . .,” id. (emphasis added), and—unlike the oddly inserted “in addition to

20

arbitration” phrase generating the confusion in Comedy Club, Inc.—is contained in a

21

separate paragraph directly below the general arbitration agreement provision. Dkt. 50-2

22

at 3. Like its construction of most contracts containing general provision, exceptions, and

23

limitations, the court reasonably construes the Chung Arbitration Agreement to generally

24

require the parties to arbitrate any and all claims (general arbitration agreement

25

provision), except those seeking an injunction for allegedly misappropriated intellectual

26

property (intellectual property injunctive relief carveout). For that latter set of claims,

27

either party may (general arbitration agreement) but need not (intellectual property

28

injunctive relief carveout) pursue such claims in arbitration.
13

In this case, plaintiff chose to limit the relief sought for the trade secret

1
2

misappropriation claims against Chung to a permanent injunction. Consistent with the

3

Chung Arbitration Agreement’s recognition that “nothing in this Agreement shall prevent

4

either party from seeking from a court the remedy of an injunction” for such claims,” Dkt.

5

50-2 at 3, plaintiff chose to bring such claims in this court. As a result, the court rejects

6

Chung’s attempt to compel arbitration on the basis of the intellectual property injunctive

7

relief carveout’s purported ambiguity.
In a passing paragraph, Chung asserts that the court should invoke the Chung

8
9

Arbitration Agreement’s severability provision to strike the intellectual property injunctive
relief carveout because “[t]ime and again, California Courts have determined that one-

11

United States District Court
Northern District of California

10

sided arbitration provisions that reserve the claims employers are likely to pursue (e.g.,

12

trade secret claims for equitable relief) for court and push employee-based claims . . . to

13

arbitration are substantively unconscionable.” Dkt. 56 at 7. Chung fails to explain how or

14

why the carveout here—which states that “nothing in this Agreement shall prevent either

15

party from seeking from a court . . .“ Dkt. 50-2 at 3 (emphasis added)— qualifies as

16

“one-sided.” Plainly that provision allows either party to it to seek the subject equitable

17

relief outside of arbitration. In any event, Chung further fails to explain why this provision

18

is also procedurally unconscionable. Accordingly, the court rejects Chung’s attempt to

19

compel arbitration on the basis of the intellectual property injunctive relief carveout’s

20

purported unenforceability. Given the above, Chung’s first argument in support of his

21

request for arbitration fails.3

22
23
24
25
26
27
28

In his reply brief, Chung footnotes his intention “to file a separate motion to compel
arbitration so that the Court can either compel arbitration of his claims pursuant to Mr.
Williams’ motion or pursuant to a standalone motion brought pursuant to the specific
Cisco-Chung Arbitration Agreement.” Dkt. 56 at 8 n.2. Chung already “joined” in
Williams’ motion to compel arbitration, Dkt. 43 at 12, so he has no basis to bring a
separate motion to compel arbitration on that ground. Chung has also had over two and
a half months to bring a separate motion to compel on grounds of his arbitration
agreement and, significantly, has already briefed whether arbitration is proper on grounds
of that agreement. Given these circumstances, the court cautions Chung that he should
not file a motion to compel arbitration unless he can identify a substantial ground
provided in the Chung Arbitration agreement not previously briefed.
14
3

ii.

1

The Claims Against Chung Are Not Sufficiently Related to
the Williams Arbitration Agreement

2
3

California courts recognize that “a non-signatory defendant may invoke an

4

arbitration clause to compel a signatory plaintiff to arbitrate its claims when the causes of

5

action against the non-signatory are ‘intimately founded in and intertwined’ with the

6

underlying contract obligations.” Boucher v. Alliance Title Co., 127 Cal. App. 4th 262,

7

271 (2005). According to California courts, the basis for such compulsion arises out of

8

equitable estoppel, id. at 272, which may require compelling arbitration for claims against

9

a non-signatory “when a party has signed an agreement to arbitrate but attempts to avoid
arbitration by suing non-signatory defendants for claims that are ‘based on the same

11

United States District Court
Northern District of California

10

facts and are inherently inseparable’ from arbitrable claims against signatory defendants.”

12

Turtle Ridge Media Grp., Inc. v. Pac. Bell Directory, 140 Cal. App. 4th 828 (2006), as

13

modified (July 20, 2006).

14

To determine whether compelling arbitration on this basis is proper, courts must

15

analyze the relationship between the claims against a non-signatory defendant and the

16

contract including the subject arbitration agreement. Turtle Ridge Media Grp., Inc., 140

17

Cal. App. 4th at 835 (“Regardless of whether equitable estoppel may require detrimental

18

reliance in other contexts, the test for applying equitable estoppel to an arbitration

19

agreement is whether the causes of action are intertwined with the contract containing

20

the agreement.”). Construing California decisional law, the Ninth Circuit in Kramer v.

21

Toyota Motor Corp., 705 F.3d 1122 (9th Cir. 2013) acknowledged that compelling the

22

arbitration for claims against a non-signatory is proper under the following two

23

circumstances:

24
25
26
27
28

“(1) when a signatory must rely on the terms of the written
agreement in asserting its claims against the nonsignatory or
the claims are ‘intimately founded in and intertwined with’ the
underlying contract;” and
“(2) when the signatory alleges substantially interdependent
and concerted misconduct by the nonsignatory and another
signatory and ‘the allegations of interdependent misconduct
[are] founded in or intimately connected with the obligations of
15

the underlying agreement.’ Id. at 1128-29 citing Goldman v.
KPMG LLP, 173 Cal.App.4th 209, 221 (2009)

1

Here, the claims against Chung are not sufficiently related to the Williams

2
3

Arbitration Agreement. To substantiate his argument on this issue, Chung cites plaintiff’s

4

allegations that defendants collectively engaged in a “scheme” to misappropriate its trade

5

secrets, Dkt. 43 at 14, and a recent decision by the Central District of California in

6

Chartwell Staffing Services, Inc., v. Atlantic Solutions Group, Inc., 2020 WL 620294 (C.D.

7

Cal. Jan. 9, 2020) purportedly compelling arbitration for trade secret misappropriation

8

claims against non-signatories on the basis of similar allegations of conspiracy, Dkt. 56 at

9

5.

10

Again, Chung overstates his cited authority. The court in Chartwell considered a

United States District Court
Northern District of California

11

single motion to compel arbitration collectively filed by nine defendants in an alleged

12

scheme to misappropriate plaintiff’s trade secrets. Id. at *1. Eight of those defendants

13

were former employees, only four of whom had employment agreements with plaintiff that

14

contained arbitration provisions. Id. While repeatedly citing its respective employment

15

agreements with the former employee defendants in support of its trade secret

16

misappropriation claims, id. at *6, plaintiff opposed arbitration with even those four former

17

employee defendants who entered arbitration agreements as a condition of their

18

employment, id. at *3. The court found in favor of the defendant non-signatories on both

19

grounds stated in Kramer and compelled arbitration on the claims against them. Id. at *8.

20

With respect to its decision on the first ground, the court stated that plaintiff’s

21

repeated reference to the various employment agreements in a prior ex parte application

22

“were not mere inconsequential mentions of the agreements” but instead calculated

23

attempts by plaintiff to show that “(1) certain of its information constitutes protected trade

24

secrets; (2) each individual Defendant, as a former Chartwell employee, was put on

25

notice by the Employment Agreements of the nature of that information; and, (3) each

26

individual Defendant, as a former Chartwell employee, has agreed that they are

27

prohibited from engaging in unauthorized use of those trade secrets.” Id. at *6. On the

28

basis of those calculated references, the court decided that plaintiff’s “claims against the
16

1

non-signatory [defendants] are founded in and inextricably bound up with the obligations

2

imposed by the agreement containing the arbitration clause.” Id. at *7. The court further

3

observed that the subject “trade secret information would not have been provided to

4

defendants but for the contracts they entered into with [plaintiff].” Id.

5

With respect to its decision on the second ground, the court cited its decision on
the first ground as largely dispositive and then went on to address plaintiff’s “allegations

7

of a concerted and collusive effort by Defendants to misappropriate and use Chartwell

8

trade secrets to siphon off Chartwell customers and employees for the benefit of

9

[corporate defendant].” Id. The court characterized these allegations as “center[ing]

10

around the rights and obligations created by the Employment Agreements” (without

11

United States District Court
Northern District of California

6

specifying which employment agreements) and, on the basis of that characterization,

12

concluded that plaintiff’s claims against the non-signatory defendants “are based on the

13

same facts and are inherently inseparable from arbitrable claims against signatory

14

[defendants].” Id.

15

For multiple reasons, the court rejects the argument that Chartwell controls this

16

instant case. First, unlike the plaintiff in Chartwell, plaintiff here expressly consented to

17

Williams’ motion to compel arbitration. Plainly, then, plaintiff is not trying to avoid certain

18

terms of its employment arrangement with Williams but nonetheless selectively assert

19

others. Given that, compelling the non-signatory claims to arbitration would not advance

20

the rationale underlying the subject equitable doctrine.

21

Second, unlike the broader employment contracts in Chartwell that included

22

certain “prohibitions and restrictive covenants,” id. at * 6, the Williams Arbitration

23

Agreement is a standalone two-page document that says nothing about Williams’

24

substantive employment obligations with respect to plaintiff’s trade secrets, Dkt. 41-2 at

25

2-3. The Williams Arbitration Agreement itself does not support any of the various

26

showings that the court in Chartwell identified as supporting plaintiff’s trade secret claims

27

against the non-signatory defendants. Id. at *7.

28

In any event, even without these distinctions, the court finds Chartwell’s reasoning
17

1

on the non-signatory compulsion issue unpersuasive. Significantly, with respect to the

2

first ground set forth in Kramer, the court in Chartwell failed to explain why the signatory

3

employment contracts were necessary to plaintiff’s claims against the non-signatory.

4

While the court in Chartwell identified three aspects of the underlying claims that the

5

subject agreements supported, id. at *6, helping to substantiate a required element is

6

different than being necessary to substantiate such an element. Similarly, with respect to

7

the second ground set forth in Kramer, the court in Chartwell based its decision upon its

8

characterization of the allegations of the defendants’ collective misconduct. Aside from

9

the cursory “but for” observation supporting its first decision, the court did not clarify how
the alleged collective misconduct by defendants generally arises out of the signatory

11

United States District Court
Northern District of California

10

employees’ employment contracts.
Instead, the court concludes that the claims against Chung do not depend upon

12
13

the Williams Arbitration Agreement. The claims against Chung are for misappropriation

14

of trade secrets under federal and California state law. As a general matter, a plaintiff

15

need not identify an agreement to state a trade secrets misappropriation claim and

16

Chung fails to explain why plaintiff’s theory of his liability for such claims depend upon the

17

Williams Arbitration Agreement. While Chung accurately points out plaintiff’s allegations

18

that defendants conspired in a collective scheme to misappropriate its trade secrets, such

19

allegations do not establish that the claims against Chung necessarily rely upon or are

20

intimately connected with the Williams Arbitration Agreement.
Chung’s remaining argument—i.e., that the court should order arbitration to avoid

21
22

duplicative litigation in parallel proceedings, Dkt. 56 at 6—is a policy oriented critique that

23

Chung fails to support with any citation to controlling California law, and, in any event,

24

has already been characterized by the United States Supreme Court as an acceptable

25

byproduct of litigation.4 As a result, the court denies Chung’s request to compel

26
27
28

Moses H. Cone Mem'l Hosp., 460 U.S. at 19-20 (“The Hospital points out that it has two
substantive disputes here—one with Mercury . . . and the other with the Architect . . . The
latter dispute cannot be sent to arbitration without the Architect's consent, since there is
no arbitration agreement between the Hospital and the Architect. It is true, therefore, that
18
4

1
2

arbitration of the claims against him.
c.

The Remaining Defendants’ Requests to Compel Arbitration

3

The remaining non-signatory defendants base their request for arbitration on a

4

materially similar theory of intertwinement to that proffered by Chung. In his opening

5

brief, He asserts that “[p]lainly, each Defendant’s defense is inextricably intertwined,”

6

explaining only that “[e]ach defendant will require the testimony of the others to rebut

7

Cisco’s allegations” and “the outcome of one may affect the others.” Dkt. 54 at 9-10. In

8

his reply, He literally copies and pastes (without formatting) Chung’s argument

9

concerning Chartwell’s applicability. Plantronics similarly takes a page out of Chung’s
briefing, both joining in it, Dkt. 47, and citing Chartwell for the vague proposition that

11

United States District Court
Northern District of California

10

”[o]ther courts have ordered non-signatories to arbitration in trade secret cases, for

12

example, when the trade secret claims asserted against signatory and non-signatory

13

defendants were intertwined claims for misappropriation and the trade secret claim

14

against the signatory was encompassed within the sweeping language of the arbitration

15

clause at issue,” Dkt. 59 at 16. Puorro does largely the same when joining Chung’s

16

motion in his opening brief. Dkt. 45 at 12-14.

17

Here, the court denies the remaining non-signatory defendants’ requests to

18

compel arbitration of the claims against them for the same reasons noted above with

19

respect to Chung. Significantly, these defendants’ theory of intertwinement fails to

20

establish how or why the various claims against them necessarily rely upon or are

21

intimately connected with the Williams Arbitration Agreement. Similarly, just as the court

22

rejected Chung’s summary assertion that compelling arbitration would advance the

23

court’s interest in judicial efficiency, it does the same with respect to that argument by

24

Puorro. Dkt. 60 at 5. While consolidating all litigation related to a dispute in a single

25
26
27
28

if Mercury obtains an arbitration order for its dispute, the Hospital will be forced to resolve
these related disputes in different forums. That misfortune, however, is not the result of
any choice between the federal and state courts; it occurs because the relevant
federal law requires piecemeal resolution when necessary to give effect to an
arbitration agreement.”) (italics in the original) (bold added).
19

1

forum is desired policy, its efficiency gains do not overcome plaintiff’s right to litigate

2

against the non-signatory defendants in this forum. Accordingly, the court denies the

3

remaining non-signatory defendants request to compel arbitration of the claims against

4

them.

5

2.

a.

6
7

Motion to Stay
The Court Stays the Instant Litigation Against Williams

A court must stay judicial proceedings against a party bound to an arbitration

8

agreement that falls within the scope of the FAA. 9 U.S.C. § 3. As detailed above,

9

plaintiff consented to Williams’ alternative motion to compel arbitration, which Williams
brought pursuant to Title 9 U.S.C. § 4, Dkt. 41 at 2. Given that, the court grants Williams’

11

United States District Court
Northern District of California

10

request for a stay of the proceedings against him.
b.

12

Signatory Defendants to Proceed

13
14
15

The Court Allows the Instant Litigation Against the Non-

To determine whether staying litigation under its inherent authority is proper, a
district court should weigh the following competing interests:

16

1.

The possible damage that may result from granting a stay.

17

2.

The hardship or inequity that a party may suffer if required to litigate.

18

3.

How a stay would affect the “orderly course of justice,” including whether it

19

would simplify or complicate factual and legal issues in the pending

20

litigation. Lockyer v. Mirant Corp., 398 F.3d 1098, 1110 (9th Cir. 2005).

21

In Clinton v. Jones, the United States Supreme Court has acknowledged that “[t]he

22

proponent of a stay bears the burden of establishing its need.” 520 U.S. 681, 708 (1997).

23

Citing Landis, the Ninth Circuit in Lockyer further clarified that “if there is even a fair

24

possibility that the stay . . . will work damage to someone else, the party seeking the stay

25

must make out a clear case of hardship or inequity.” Lockyer, 398 F.3d at 1112.

26

Here, as a general matter, each of the non-signatory defendants only joined in

27

Williams’ briefing to support their respective requests. Dkt. 47; Dkt. 45 at 12-13; Dkt. 43

28

at 13; Dkt. 54 at 2. Except as specified below, none of the non-signatory defendants
20

1

advanced any argument different than that proffered by Williams. Given that, the court

2

will generally refer to only Williams’ briefing when addressing the propriety of a stay of the

3

proceedings against them.

4
5

i.

Inequity Resulting from Denying the Stay

In his opening brief, Williams failed to offer any showing of inequity that would

6

befall him or the non-signatory defendants in the event the court denied the requested

7

stay of proceedings against the non-signatory defendants. In his reply, Williams posits

8

only that “[a]llowing Cisco to pursue identical claims against Mr. Puorro and Poly in this

9

Court while concurrently arbitrating those claims against Mr. Williams could very likely
result in ‘inconsistent and adverse rulings’ harmful to Mr. Williams.” Dkt. 58 at 9. Other

11

United States District Court
Northern District of California

10

than that summary assertion, Williams failed to explain what those hypothetical rulings

12

might actually be, their likelihood, or why they would be unfairly harmful to his litigation

13

position. Absent such explanations, Williams’ cannot establish the “clear case of

14

hardship or inequity” necessary for this court to enter a stay. Lockyer, 398 F.3d at 1112.

15

As a result, the court concludes that this factor cuts against granting the requested stay.

16
17

ii.

Possible Damage Resulting from Grant of Stay

Williams similarly fails to show the absence of any damage that would befall

18

plaintiff in the event the court were to grant his requested stay of proceedings against the

19

non-signatory defendants. Instead, Williams turns the applicable burden on its head,

20

neglecting any argument on this issue in his opening brief and mistakenly dedicating a

21

section of his reply to the argument that “Cisco has not demonstrated that it will be

22

prejudiced by a stay pending arbitration.” Dkt. 58 at 9-10 (emphasis added). Williams’

23

reply on this point only critiqued the purported harms that plaintiff argues in its opposition

24

it would suffer in the event of a stay. Id. at 9 (“Cisco also attempts to argue that it will be

25

‘damaged’ and ‘unduly prejudiced’ by a stay. These arguments fail for several reasons.”).

26

Perhaps a fine distinction, such criticisms themselves fail to affirmatively show that

27

plaintiff would not suffer damage from a stay.

28

In any event, even if Williams had proffered any arguments supporting an
21

1

affirmative showing, the court finds that the purported harms identified by plaintiff in its

2

opposition would tend to undermine any such showing. Significantly, plaintiff argues that

3

a stay would create a material risk of spoliation. Dkt. 53 at 17-18. While the court

4

understands Williams’ critique that plaintiff failed to offer any evidence substantiating

5

actual spoliation and, even if such spoliation did occur, plaintiff could seek sanctions, Dkt.

6

58 at 9-10, the court recognizes the reality that sanctions do not always adequately

7

compensate an aggrieved party. Such recognition is particularly well-placed in a situation

8

where, like here, the full extent of some alleged wrongdoing cannot be known.

9

Additionally, while not evidence, plaintiff proffers various non-information and belief
allegations supporting its claimed risk of spoliation. FAC ¶ 91 (Chung performed online

11

United States District Court
Northern District of California

10

searches for “how to permanently delete icloud backup” and “how to see what is [sic] the

12

thumb drive without detection”), id. ¶ 123 (He deleted from his LaCie drive thousands of

13

plaintiff’s files, some of which contained confidential information, as well as certain source

14

code stacks), id. ¶ 132 (Williams, Puorro, and unspecified Plantronics’ executives used

15

their personal emails and phone calls to communicate). These allegations, which appear

16

substantiated by pre-complaint investigations, support plaintiff’s claimed risk of spoliation

17

in the event of a stay. Accordingly, the court concludes that this consideration cuts

18

against granting the requested stay.

19
20

iii.

Effect of a Stay on the Orderly Course of Justice

In his opening brief, Williams asserts that the claims against the non-signatory

21

defendants (especially those against Puorro) “raise numerous questions of fact and law

22

that are common to each Defendant.” Dkt. 41 at 15-16. On that basis, Williams argues

23

that that the court should stay the action against the non-signatory defendants to avoid

24

needless litigation and minimize the risk of inconsistent rulings. Id.

25

In its opposition, plaintiff argues that the claims against each non-signatory

26

defendant, as well as their supporting allegations, “stand alone” and that there are

27

numerous factual and legal questions implicated in the claims against the non-signatory

28

defendants that the arbitration against Williams will not resolve. Dkt. 53 at 19. Plaintiff
22

1

also asserts that there is no risk of inconsistent rulings because any ruling by the

2

arbitrator would not bind this court. Dkt. 53 at 19-20.

3

In his reply, Williams points out numerous paragraphs in the FAC alleging a

4

collective scheme by the defendants to misappropriate plaintiff’s purported trade secrets.

5

Dkt. 58 at 8. Williams also points out that some allegations supporting both the claims

6

against him, Puorro, and Plantronics are identical and that, on the basis of such

7

allegations, the liability of the latter two defendants “is entirely derivative of Mr. Williams’

8

own liability and thus the arbitration will have preclusive effect on those claims should the

9

arbitrator find Mr. Williams did not misappropriate Cisco’s trade secrets.” Id. Relying
upon these two sets of allegations relating to both him and the other non-signatory

11

United States District Court
Northern District of California

10

defendants, Williams argues that “a stay will assist in simplifying issues of proof and

12

evidence relating to overlapping factual issues.” Id. Williams further adds that whether

13

the purportedly misappropriated information itself qualifies as a trade secret poses

14

numerous other common questions. Id. at 7. Lastly, Williams responds to plaintiff’s final

15

assertion by clarifying that just because an arbitrator’s ruling may not preclude a finding

16

in this litigation does not prevent the possibility that a ruling from this court would be

17

inconsistent with that of the arbitrator. Id. at 9.

18

Here, the court concludes that a stay would advance the orderly course of justice.

19

As an initial matter, the court agrees that various allegations proffered to support the

20

claims against Williams are similarly used to support the claims against Puorro, FAC 127-

21

177, 285-86, 300-01, and Plantronics, id. ¶¶ 317-18, 321 (alleging vicarious and direct

22

liability on the basis of Puorro’s and Williams’ alleged misconduct). Plaintiff’s allegations

23

of a collective “scheme,” which included Williams, further show factual questions common

24

to all defendants. FAC ¶ 8, 317-22. Aside from the defendants’ purported conduct,

25

Williams is also correct that a core issue in this litigation—whether the information

26

purportedly misappropriated by defendants qualifies as trade secrets—poses numerous

27

threshold issues that must be decided both by Williams’ arbitrator and this court. Given

28

the nature of those issues (i.e., mixed questions of legal fact), the court acknowledges
23

1
2

the possibility of inconsistent rulings.
That said, Williams’ fails to explain how the court’s abstention in this action would

3

simplify those questions. Plaintiff posits that the Williams arbitration would have no

4

preclusive effect on the claims against the non-signatory defendants. Dkt. 53 at 19-20.

5

Except as provided by the doctrine of nonmutual collateral estoppel, Dkt. 58 at 8 n.3,

6

Williams does not disagree, Dkt. 58 at 8-9. The court understands that there is a

7

scenario that the non-signatory defendants may invoke that doctrine on certain issues in

8

this litigation (i.e., in the event Williams were to prevail on them at arbitration) and that—

9

in the event the court determined such invocation were proper—granting the requested
stay would then simplify the issues presented. However, given that this scenario rests on

11

United States District Court
Northern District of California

10

at least two contingencies, the court assigns it only little weight when assessing Lockyer’s

12

third interest. In any event, such limited weight fails to offset Williams’ other

13

shortcomings under Lockyer.

14

Separate from Williams’ briefing, Plantronics and Chung raise two other distinct

15

arguments in support of the requested stay of the proceedings against them. In its reply,

16

Plantronics suggests that, absent a stay, litigation in this action would “undermine”

17

Williams’ arbitration proceeding and “thwart the federal policy in favor of arbitration.” Dkt.

18

58 at 16-17. Aside from reciting the existence of overlapping questions of fact between

19

the two proceedings (already addressed above), Plantronics fails to explain that

20

suggestion.

21

Chung summarily asserts that this court “must” stay the instant proceeding

22

pending the Williams arbitration because the two proceedings involve the same

23

substantive allegations of wrongdoing. Dkt. 56 at 8. In support of it, he cites Rent-A-

24

Center West, Inc. v. Jackson, 561 U.S. 63, 78 n.2 (2010) and Ziober v. BLB Resources,

25

Inc., 839 F.3d 814, 817 (9th Cir. 2016). Chung’s citation to Rent-A-Center is

26

unsupportable, as that citation corresponds to the dissent and, in any event, the footnote

27

is entirely off topic. Chung’s citation to Ziober fares no better, as that portion of the Ninth

28

Circuit’s opinion interpreted Title 9 U.S.C. § 3, which, as noted above, requires a stay of
24

1

federal court litigation against a signatory defendant pending arbitration. By his adoption

2

of Williams’ briefing on this issue, Chung has already ceded that a stay of proceedings

3

against non-signatory defendants is discretionary. Dkt. 41 at 15 (citing district court case

4

law for the proposition that a court “may” stay an entire action pending arbitration). Given

5

the above, any distinct arguments on the stay issue contributed by the non-signatory

6

defendants are immaterial.

7

In short, defendants failed to carry their burden under Lockyer. As a result, the

8

court denies the motion to stay the proceedings against the non-signatory defendants.
4.

9

Motions to Dismiss5

Given the relationship between the claims alleged against the various defendants,

10

United States District Court
Northern District of California

11

the court analyzes their motions to dismiss on a claim-by-claim (rather than motion-by-

12

motion) basis.
a.

13

Trade Secret Misappropriation Claims

“To state a claim for trade secret misappropriation under the [Title 18 U.S.C. §

14
15

1836] and [California Civil Code § 3426], a plaintiff must allege that: (1) the plaintiff

16

owned a trade secret; (2) the defendant misappropriated the trade secret; and (3) the

17

defendant's actions damaged the plaintiff.” Alta Devices, Inc. v. LG Elecs., Inc., 343 F.

18

Supp. 3d 868, 877 (N.D. Cal. 2018).
i.

19

Whether Plaintiff Adequately Alleged Ownership of Trade
Secrets in the Purportedly Misappropriated Information

20

Title 18 U.S.C. § 1839(3) defines a trade secret to mean the following:

21

“all forms and types of financial, business, scientific, technical,
economic, or engineering information, including patterns,
plans, compilations, program devices, formulas, designs,

22
23
24
25
26
27
28

5

Because the court has ordered that plaintiff litigate its claims against Williams in
arbitration, the court TERMINATES without decision Williams’ alternative motion to
dismiss. At this time, the court does not make any decision on the preclusive effect of
this section of its order on the Williams arbitration. Relatedly, the court will not consider
the arguments made by Williams in support of his now-terminated alternative motion to
dismiss in its analysis of the remaining defendants’ respective motions to dismiss.
Whatever the scope of their joinders, those defendants had a full and fair opportunity to
brief their own arguments in support of their motions to dismiss.
25

1
2
3
4
5
6
7

prototypes, methods, techniques, processes, procedures,
programs, or codes, whether tangible or intangible, and
whether or how stored, compiled, or memorialized physically,
electronically, graphically, photographically, or in writing if-(A) the owner thereof has taken reasonable measures to keep
such information secret; and
(B) the information derives independent economic value, actual
or potential, from not being generally known to, and not being
readily ascertainable through proper means by, another person
who can obtain economic value from the disclosure or use of
the information.” 18 U.S.C. § 1839(3)(A)-(B).

8

California Civil Code § 3426.1(d) similarly defines a trade secret to mean

9

“information . . . that (1) [d]erives independent economic value, actual or potential, from
not being generally known to the public or to other persons who can obtain economic

11

United States District Court
Northern District of California

10

value from its disclosure or use; and (2) [i]s the subject of efforts that are reasonable

12

under the circumstances to maintain its secrecy.” Cal. Civ. Code § 3426.1(d)(1)-(2).

13

California courts have explained that “[i]nformation has a broad meaning” and

14

“[t]he definition of trade secret is . . . unlimited as to any particular class or kind of matter

15

and may be contrasted with matter eligible for patent or copyright protection, which must

16

fall into statutorily defined categories . . . A trade secret may consist of any formula,

17

pattern, device or compilation of information which is used in one's business, and which

18

gives him an opportunity to obtain an advantage over competitors who do not know or

19

use it.” Altavion, Inc. v. Konica Minolta Sys. Lab., Inc., 226 Cal. App. 4th 26, 53 (2014).

20

Here, defendants proffer the following two grounds to support their argument that

21

plaintiff failed to allege its ownership of trade secrets in the misappropriated information

22

at issue: (1) plaintiff failed to allege such secrets with sufficient particularity and (2)

23

plaintiff failed to show that the purportedly misappropriated information has independent

24

economic value. The court analyzes each ground in turn.

25

A.

26
27
28

Description of the Purportedly Misappropriated
Information

“[C]ourts are in general agreement that trade secrets need not be disclosed in
detail in a complaint alleging misappropriation for the simple reason that such a
26

1

requirement would result in public disclosure of the purported trade secrets.” Autodesk,

2

Inc. v. ZWCAD Software Co., 2015 WL 2265479, at *6 (N.D. Cal. May 13, 2015). Given

3

that, “a plaintiff need not spell out the details of the trade secret,” but it must “describe the

4

subject matter of the trade secret with sufficient particularity to separate it from matters of

5

general knowledge in the trade or of special persons who are skilled in the trade, and to

6

permit the defendant to ascertain at least the boundaries within which the secret lies.”

7

Alta Devices, 343 F. Supp. 3d at 881-82; accord Autodesk, 2015 WL 2265479, at *5;

8

Vendavo, Inc. v. Price f(x) AG, 2018 WL 1456697, at *4 (N.D. Cal. Mar. 23, 2018);

9

MedioStream, Inc. v. Microsoft Corp., 869 F. Supp. 2d 1095, 1113 (N.D. Cal. 2012) (“The
complaint need not ‘spell out the details of the trade secret’ but must identify the trade

11

United States District Court
Northern District of California

10

secret with sufficient particularity to give defendants ‘reasonable notice of the issues

12

which must be met at the time of trial and to provide reasonable guidance in ascertaining

13

the scope of appropriate discovery.’”).6
As this court has recently noted, “allegations that set out purported trade secrets in

14
15

broad, categorical terms that are merely descriptive of the types of information that

16

generally may qualify as protectable trade secrets’ are insufficient to state a claim. Five

17

Star Gourmet Foods, Inc. v. Fresh Express, Inc., 2020 WL 513287, at *7 (N.D. Cal. Jan.

18

31, 2020) (emphasis in the original). For example, courts reject the following sorts of

19

descriptions as insufficiently specific to allege a trade secret:
•

20

Allegations of “source code, customer lists and customer related information,
pricing information, vendor lists and related information, marketing plans and

21
22
23
24
25
26
27
28

6

In its reply, Plantronics cites Top Agent Network, Inc. v. Zillow, Inc., 2015 WL 7709655,
at *4 (N.D. Cal. Apr. 13, 2015) for the proposition that a pleading must offer “enough
detail to allow the Court to make the required ‘item-by-item determination’ of what is
and is not protectable under [California Civil Code § 3426].” Dkt. 59 at 10 (emphasis in
the original). The court in Top Agent did not cite any Ninth Circuit authority directly
supporting such an onerous requirement. Rather, the court in Top Agent merely cited
another district court opinion and provided a parenthetical to a Ninth Circuit decision
holding that “while a particular customer database qualified as a trade secret, the
generalized assertion of trade secrets in diagnostic software and operating systems did
not provide sufficient specificity.” Id. at * 4. That holding falls short of a general rule
requiring an “itemized” identification of protected information.
27

1

strategic business development initiatives, ‘negative knowhow’ learned through

2

the course of research and development, and other information related to the

3

development of its price-optimization software, including ideas and plans for

4

product enhancements.” Vendavo, 2018 WL 1456697, at *3-4.
•

5

Allegations of “data on the environment in the stratosphere” and “data on the

6

propagation of radio signals from stratospheric balloon-based transceivers.”

7

Space Data Corp. v. X, 2017 WL 5013363, at *2 (N.D. Cal. Feb. 16, 2017).
•

8

manufacturing logistics,” Five Star Gourmet Foods, 2020 WL 513287, at *7.

9

For analytical purposes, the court separately addresses each portion of the

10

United States District Court
Northern District of California

11

Allegations of “marketing strategy, product composition, packaging and

allegedly misappropriated trade secret information per each defendant below.
1.

12

The Information Allegedly Misappropriated

13

by Williams

14

Plaintiff argues that the FAC adequately alleges that Puorro induced Williams to

15

take the following categories of information: “market and strategy data, product strategy,

16

financial data, information about Cisco’s Limited Restructurings, Cisco’s investments in

17

emerging technologies, sales opportunities and customer lists, product pipelines, partner

18

margins, and future plans for current products.” Dkt. 51 at 13; Dkt. 52 at 10-11.7 Plaintiff

19

further argues that “[w]ithin those categories of information, Cisco alleges with

20

particularity the subject matter of specific trade secrets that Mr. Puorro induced Mr.

21

Williams to take,” including “a redacted document” containing a range of “non-public

22
23
24
25
26
27
28

Plaintiff also notes its allegation that Williams retained a “Time Machine back-up” of his
company laptop that included “sales forecasts, customer names, commitments, and
upsides.” Id. at 13-14. Unlike the information listed above, plaintiff alleges
misappropriation of that device’s information only in its claim against Williams. Compare
FAC ¶ 259 (“Mr. Williams misappropriated Cisco’s trade secrets by acquisition by
improper means (including . . . by retaining possession of Cisco Confidential
Materials after the termination of his employment) (emphasis added) with id. ¶¶ 286,
317 (omitting retention of that device as a basis for misappropriation in its claims against
Puorro and Plantronics). Accordingly, the court need not consider whether plaintiff
identified that information with sufficient particularity in its analysis of the claims against
Plantronics and Puorro.
28
7

1

financial information” and a sales strategy named “Project Liberator,” Dkt. 51 at 13; Dkt.

2

52 at 11, as well as “information about organizational changes at Cisco before they were

3

made public, a discussion guide including Cisco product strategy and other financial data,

4

details of a Cisco program named ‘Project X’ [and] Cisco’s future plans for particular

5

collaboration products,” Dkt. 51 at 13; Dkt. 52 at 11.
In its reply, Plantronics argues that plaintiff’s proffered descriptions of this

7

information are potentially applicable to “millions of documents in a technology company

8

like Cisco and hardly provide Poly with notice of what specific information is at issue here

9

or whether it is protectable.” Dkt. 59 at 11. With respect to the particular subject matter

10

identified by plaintiff, Plantronics addresses only two documents supposedly referenced

11

United States District Court
Northern District of California

6

in the allegations noted immediately above—"the document described in paragraphs

12

156-7 . . . that Mr. Williams assembled for an interview with Poly []” and “the document

13

described in paragraph 164 . . . an email describing Cisco’s sales strategy, Project X [].”

14

Dkt. 59 at 12. Plantronics contends that the FAC alleges only that the information

15

referenced in these documents is “non-public or confidential,” id., and, as a result, does

16

not merit trade secret status. Relatedly, Puorro adds that plaintiff “only identifies

17

information that is the very type of publicly available market share and financial

18

information that is available for any publicly traded company like Cisco” and “cannot

19

therefore be trade secrets.” Dkt. 60 at 3.

20

Here, the court concludes that plaintiff described the trade secret information

21

purportedly misappropriated by Williams with sufficient particularity. As an initial matter,

22

the court agrees with Plantronics that—if left unqualified—some of the descriptions of the

23

categories of information purportedly misappropriated by Williams would serve as the

24

exact sort of allegations that a consensus of courts in this district have held insufficiently

25

particularized. FAC ¶ 154 (“market and strategy data”); ¶ 157 (“product strategies and

26

other financial data”); ¶ 159 (“business information”). However, plaintiff narrowed the

27

scope of information at issue in such categories to particular subjects mentioned in

28

certain documents or communications alleged in the FAC. Such subject matter includes
29

1

plaintiff’s collaboration business, id. ¶ 131, the “Project Liberator” sales strategy, id. ¶

2

153, plaintiff’s impending layoffs (including the identities of employees who would be

3

affected), id. ¶¶ 141, certain marketing opportunities, id. ¶ 156, the “Project x” sales

4

strategy, id. ¶ 164, and the status of a particular but unidentified product, id. ¶ 169.

5

The court understands Plantronic’s criticism in its reply that the FAC itself alleges

6

that the above noted documents and communications contain only “non-public and

7

confidential” information. Dkt. 59 at 12. However, Plantronics fails to cite any controlling

8

authority for the proposition that plaintiff must, at the pleading stage, show that the

9

specific information contained in the above referenced documents itself qualifies as a
trade secret to satisfy the particularity requirement. Such proposition is not the test.

11

United States District Court
Northern District of California

10

Rather, the test is whether the complaint’s “level of detail . . . is sufficient to ascertain at

12

least the boundaries within which the secrets lie and the scope of appropriate discovery.”

13

Five Star Gourmet Foods, 2020 WL 513287, at *7. When limiting the categories of the

14

information allegedly misappropriated by Williams to the particular subjects referenced in

15

the above noted documents, the FAC passes that test.

16

Puorro’s added criticism does not alter this conclusion. In his single paragraph

17

reply on this issue, he failed to explain how the specifics of the subject matter noted

18

above were publicly known, particularly at the time of their alleged disclosure. On a

19

related point, the divisive declaration proffered by Williams in support of his reply (Dkt.

20

58-1) also does not alter this conclusion. In that declaration, Williams purports to attach

21

the documents referenced at FAC paragraph 156 (“Exhibit A”) and paragraph 164

22

(“Exhibit B”), which, as cited above, serve as two of the allegations referencing

23

documents that detail two aspects of the subject matter allegedly misappropriated by

24

Williams. Dkt. 58-1 ¶¶ 2-3. Plantronics footnotes that the court should consider each of

25

these documents because “plaintiff’s response briefs rely extensively [upon them] as

26

central to its trade secret claims.” Dkt. 59 at 12 n.4. While Plantronics fails to close the

27

loop on the relevance of such consideration, it appears to suggest that the court’s

28

incorporation by reference of the contents of these materials would undermine any
30

1

argument that they reference matters subject to trade secret protection. Plaintiff objects

2

to this request on grounds of authenticity of the materials attached. Dkt. 65 at 4-5.
The court sustains that objection. The document referenced at FAC paragraph

3
4

164 is an August 22, 2019 email. FAC ¶ 164. The document attached as Exhibit B is an

5

email dated September 19, 2019. Dkt. 57-1 at 15. Plainly, they are not the same email.

6

While FAC paragraph 156 references more than one “version” of the “discussion guide”

7

PowerPoint presentation, id. ¶ 156, Exhibit A does not include the “Poly has to be on Par

8

with Cisco” statement allegedly included in the first referenced version and does not

9

include any parent document showing that it was the version “later emailed” to a
Plantronics executive’s personal address. Dkt. 57-2. Given that, whichever “version” of

11

United States District Court
Northern District of California

10

the PowerPoint discussion guide Exhibit A might be, it is neither of those referenced at

12

FAC paragraph 156. Accordingly, the court will not consider Exhibit A or Exhibit B in its

13

decision.8 As a result, plaintiff described the trade secret information purportedly shared

14

by Williams with Puorro and Plantronics with sufficient particularity.
2.

15

The Information Allegedly Misappropriated

16

by Chung

17

Plaintiff argues that the FAC adequately alleges that Chung took the following

18

categories of information: “source code, schematics, design details and specifications,

19

user feedback, design documentation, and features relating to Cisco’s existing and future

20

products, as well as Cisco business information such as marketing strategy, cost and

21

pricing information, and payment information.” Dkt. 51 at 11-12; Dkt. 50 at 9. Plaintiff

22

further argues that, “beyond categories of information, Cisco alleges with particularity the

23

technical subject matter of specific trade secrets within those categories that Dr. Chung

24

took, including, for example, Cisco’s marking opportunities in 5G, design specifications of

25

a pre-release video conferencing display prototype, source code for debugging a user

26
27
28

Given this decision, the court need not consider Williams’ underlying administrative
motion to seal those materials (Dkt. 57) or plaintiff’s declaration in support of that motion
(Dkt. 64). Accordingly, the court TERMINATES that motion (Dkt. 57) as moot. Unless
withdrawn by Williams, the materials filed with it shall remain restricted.
31
8

1

interface, artwork prototypes, user experience design documentation, user interview

2

feedback, and schematics for the above-mentioned pre-release video conferencing

3

display prototype, design details and specifications for Cisco’s sound bar products, and

4

the ‘EA document’ describing component specifications and competitive differentiators for

5

Cisco’s current and not yet released products.” Dkt. 51 at 11-12; Dkt. 50 at 9.

6

In its reply, Plantronics similarly characterizes these descriptions as potentially

7

applicable to “millions of documents” and incapable of providing it “with notice of what

8

specific information is at issue here or whether it is protectable.” Dkt. 59 at 11.

9

Plantronics fails to address the effect that plaintiff’s identification of the above referenced
subjects would have upon such notice. Chung, however, does go one step further. He

11

United States District Court
Northern District of California

10

argues that, even though plaintiff identified various subject matter of information

12

purportedly misappropriated by him, plaintiff fails to allege that such information contains

13

trade secrets. Dkt. 56 at 9-10. In Chung’s words, if plaintiff’s position were accepted,

14

“everything mentioned in the complaint is a trade secret.” Id. at 10.

15

Here, the court concludes that plaintiff described the trade secret information

16

purportedly misappropriated by Chung with sufficient particularity. Again, while the court

17

agrees with defendants that the categories of misappropriated information alleged at FAC

18

paragraphs 26 and 199 are themselves insufficiently particularized, plaintiff qualifies the

19

breadth of such information by reference to their subject matter in other allegations. As

20

argued by plaintiff, such subject matter includes “Cisco’s contribution to 5G technology . .

21

. and design specification of a pre-release video conferencing display prototype,” FAC ¶

22

36, source code for debugging a user interface, id. ¶ 41, pre-release video conferencing

23

display prototypes, id. ¶ 42, design details and specification related to plaintiff’s sound

24

bar products, id. ¶ 45 (alleged on information and belief), over 100 webinar presentations

25

relating to plaintiff’s communications product portfolio, id. ¶ 65 (alleged on information

26

and belief), a presentation detailing strategy and costs for a pre-release video

27

conferencing display product, id. ¶ 51 (alleged on information and belief), plaintiff’s

28

marketing position in the collaboration space, id. ¶ 64, and “component specifications and
32

1

competitive differentiators” for plaintiff’s current and unreleased hardware products, id. ¶

2

74. These subject matter qualifications again allow defendants a “level of detail . . . [that]

3

is sufficient to ascertain at least the boundaries within which the secrets lie and the scope

4

of appropriate discovery.” Five Star Gourmet Foods, Inc., 2020 WL 513287, at *7.

5

Accordingly, plaintiff described the trade secret information purportedly misappropriated

6

by Chung with sufficient particularity.

7

3.

The Information Allegedly Misappropriated

8

by He

9

Plaintiff argues that the FAC adequately alleges that He took the following
categories of information: “design and architectural documents, hardware diagrams,

11

United States District Court
Northern District of California

10

schematics, source code stacks, and engineering specifications relating to existing and

12

future Cisco products, and non-public financial information.” Dkt. 51 at 12; Dkt. 66 at 9.

13

Plaintiff further argues that, “within those categories of information, Cisco alleges with

14

particularity the technical subject matter of specific trade secrets that Mr. He took,

15

including for example, architectural design documents for an unreleased Cisco headset

16

concept, a hardware diagram for a Cisco headset prototype, design and configuration

17

documents for Cisco’s headset prototypes, a schematic for an unreleased IP telephone

18

project, and a full engineering specification for a next-generation conference room

19

collaboration device.” Dkt. 51 at 12; Dkt. 66 at 9-10.

20

In its reply, Plantronics repeats its prior arguments on this issue, Dkt. 59 at 11, and

21

again fails to address the effect that plaintiff’s identification of the above referenced

22

subjects would have upon the sort of notice required to understand the scope of

23

information at issue. In his reply, He adopts a materially similar rebuttal to that proffered

24

by Chung on this issue. Namely, He contends that, despite the various subject matter

25

purportedly identified by plaintiff, plaintiff fails to allege that the documents serving as the

26

basis for describing such subject matter themselves contain trade secrets. Dkt. 71 at 4.

27
28

Here, the court concludes that plaintiff described th trade secret information
purportedly misappropriated by He with sufficient particularity. Plaintiff qualifies the
33

1

breadth of the categories of information allegedly misappropriated by He with reference

2

to their subject matter. Such subject matter includes an unreleased headset concept and

3

like prototypes, FAC ¶¶ 103, 105, 109, “vendor roadmaps for Cisco’s products,” id. ¶ 109,

4

“an unreleased IP telephone project,” id. ¶ 118, and “full engineering specifications for a

5

next-generation conference room collaboration device,” id. ¶ 120. These subject matter

6

qualifications provide defendants sufficient detail to understand the boundaries within

7

which the alleged trade secrets lie and the scope of appropriate discovery. Therefore,

8

plaintiff described the trade secret information purportedly misappropriated by He with

9

sufficient particularity.9
B.

10

Misappropriated Information

11

United States District Court
Northern District of California

Independent Economic Value of the Allegedly

“To have independent economic value, a trade secret must be sufficiently valuable

12
13

and secret to afford an actual or potential economic advantage over others.” Calendar

14

Research LLC v. StubHub, Inc., 2017 WL 10378336, at *3 (C.D. Cal. Aug. 16, 2017). A

15

plaintiff may show independent economic value “by circumstantial evidence of the

16

resources invested in producing the information, the precautions taken to protect its

17

secrecy, and the willingness of others to pay for its access.” Id. Although “the standard

18

to show that trade secrets derive [independent] economic value is not a high standard,”

19

id. at * 4, courts recognize that merely reciting this element in a pleading is insufficient to

20

state a claim for trade secret misappropriation, Acrisure of Ca. v. So. Cal. Commc’l Ins.

21

Servs., Inc., 2019 WL 4137618, at *4 (C.D. Cal. Mar. 27, 2019) (dismissing plaintiff’s

22

trade secret claim where complaint offered “mere recitation of California Civil Code §

23

3426.1’s [independent economic value] legal element”).

24
25
26
27
28

9

On April 24, 2020, plaintiff filed an administrative motion for leave to file a supplemental
opposition. Dkt. 80. In it, plaintiff repeats its argument that, in the event the court found
that it failed to allege the misappropriated trade secrets with the requisite specificity, its
disclosure statement would remedy that shortcoming. Dkt. 80-1 at 5. Because plaintiff
alleged the trade secret information purportedly misappropriated by Williams, Chung, and
He with sufficient particularity, the court DENIES as moot plaintiff’s administrative motion.
34

1.

1

Chung and He

2
3

Value of the Information Misappropriated by

In its opposition, plaintiff advances three grounds to support its position that the

4

information misappropriated by Chung and He is economically valuable. The court

5

analyzes each in turn.

6
7
8
9
10

United States District Court
Northern District of California

11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

First, plaintiff points to its allegations at FAC paragraph 2 and paragraph 3, Dkt. 51
at 17; Dkt. 66 at 12-13, which provide the following in relevant part:
“Cisco has invested significant resources to design, build, and
sell its robust collaboration platform, which includes unified
communications and video conferencing software and
collaboration endpoints. . . . Cisco’s engineers rely upon
tangible and intangible financial, business,
scientific,
technical, economic, and engineering information, such as
source code, schematics, design details and specifications,
user feedback, design documentation, and feature
documentation relating to Cisco’s existing and future products,
as well as Cisco business information such as operations,
marketing, and resource strategies and plans, supplier
information, cost and pricing information, and payment
information to develop Cisco’s products. Cisco takes
reasonable measures to keep this information secret, and this
information derives independent economic value from not
being generally known to, and not being readily ascertainable
through proper means by, others who can obtain economic
value from the disclosure or use of the information.” FAC ¶ 2.
...
“Cisco also has made substantial and significant investments
in developing its routes to market for its collaboration products
and services, through extensive engagement of partner,
customer, and industry connections by its global sales force.
Cisco’s global sales force relies upon tangible and intangible
financial, business, and economic information, such as nonpublic financial reporting, customer lists, pricing models,
forecasting, sales, resourcing, and competitive strategies and
plans, and product refresh strategies to develop Cisco’s go-tomarket and business development plans and to market and sell
Cisco products. Cisco takes reasonable measures to keep this
information secret, and this information derives independent
economic value from not being generally known to, and not
being readily ascertainable through proper means by, others
who can obtain economic value from the disclosure or use of
the information.” Id. ¶ 3.
The above allegations only generally relate to plaintiff’s collaboration platform.
They say nothing about the economic value of the categories of information purportedly
35

1

misappropriated by Chung or He that concern the handful of subject matter that plaintiff

2

alleged with sufficient particularity. While that subject matter may serve as constituent

3

parts falling under the umbrella of plaintiff’s “collaboration platform,” that relationship does

4

not compel a reasonable inference that any information about such particular subject

5

matter is itself economically valuable.
Second, plaintiff relies upon allegations that Chung and He signed a PIIA and

6
7

those agreements generally prohibited them from disclosing its confidential and

8

proprietary information. Dkt. 51 at 17. While the existence of these agreements supports

9

the inference that information reviewed by Chung and He in the course of their
employment is valuable, it says nothing about the economic value of the particular

11

United States District Court
Northern District of California

10

information at issue.
Third, plaintiff relies upon Chung’s and He’s decisions to “risk [their] futures” at

12
13

Plantronics by “maintaining simultaneous employment at Cisco” and “accessing Cisco’s

14

trade secrets while employed there.” Dkt. 51 at 18; Dkt. 66 at 14. While plaintiff cites this

15

alleged conduct as “circumstantial evidence of the willingness of others to pay for access

16

to [the] secret information” misappropriated by these defendants, Dkt. 51 at 18, plaintiff

17

fails to provide any coherent nexus linking such risks to the subject information.10 As a

18

result, the court concludes that plaintiff failed to adequately allege that the information

19

purportedly misappropriated by Chung and He maintained independent economic value.
2.

20

Value of the Information Misappropriated by
Williams

21

In its opposition to Plantronic’s motion, plaintiff advances three grounds to support

22
23

its position on this issue with respect to Williams. The first two grounds are materially

24

similar to those considered and rejected above with respect to Chung and He. Dkt. 51 at

25

17. Given that, these grounds do not provide a basis to conclude that the information

26
27
28

In its opposition to He’s motion, plaintiff argues that He’s “use” of its trade secrets
“while at Poly—combined with his efforts to conceal that use—is circumstantial evidence
of economic value.” Dkt. 66 at 14. Plaintiff fails to cite any allegation supporting that
argument.
36
10

1

purportedly misappropriated by Williams maintained independent economic value.
As its third ground, plaintiff points to the alleged quid pro quo between Williams

2
3

and Puorro. Dkt. 51 at 18. As alleged, Williams provided Puorro certain information

4

pertaining to the subject matter identified above in exchange for employment at

5

Plantronics. FAC ¶¶ 137-146. Employment comes with certain monetary and other

6

compensatory benefits, which, plainly, are economically valuable. Given that, the court

7

may fairly infer that the information Puorro allegedly traded such employment for, too,

8

was economically valuable. Otherwise, Puorro would not have engaged in the alleged

9

quid pro quo. Accordingly, plaintiff has adequately alleged that the information

10

purportedly misappropriated by Williams has independent economic value.
ii.

United States District Court
Northern District of California

11

Alleged Misappropriation by Puorro and Plantronics

Under California Civil Code § 3426.1, “misappropriation” extends to “Acquisition of

12
13

a trade secret of another by a person who knows or has reason to know that the trade

14

secret was acquired by improper means.” Cal. Civ. Code § 3426.1(b)(1). Under that

15

same section, “improper means” is defined to include “breach or inducement of a breach

16

of a duty to maintain secrecy, or espionage through electronic or other means.” Cal. Civ.

17

Code § 3426.1(a).11 Only Puorro and Plantronics challenge the trade secrets

18

misappropriation claims against them on the basis of plaintiff’s failure to adequately

19

allege misappropriation. The court analyzes each challenge in turn.
A.

20

Misappropriation by Puorro

In his opening brief, Puorro summarily argues that “[n]owhere does plaintiff plead

21
22

any ‘reasonable basis’ to infer that Mr. Puorro improperly misappropriated Cisco’s alleged

23

trade secrets . . . Cisco has pled no facts describing how Mr. Puorro misappropriated

24

these alleged trade secrets.” Dkt. 45 at 11-12. In response, plaintiff argues that the FAC

25

adequately alleges that Puorro misappropriated the subject information under an

26
27
28

11

Title 18 U.S.C. § 1839(5) and § 1839(6) adopt materially identical definitions of
“misappropriation” and “improper means.” Given that, the court will not state them.
37

1

improper acquisition theory. Dkt. 52 at 15. “In particular,” plaintiff argues, “Mr. Puorro

2

initiated a scheme to induce Mr. Williams to reveal Cisco’s trade secrets to himself and

3

other executives for the benefit of Poly.” Id.. In reply, Puorro argues that plaintiff’s theory

4

fails to show that Puorro actually “received or acquired” the subject information or that he

5

“actually knew or had reason to know he had acquired a trade secret.” Dkt. 60 at 4.
Here, the court concludes that plaintiff adequately alleged misappropriation by

6
7

Puorro. Plaintiff alleges a series of communications between February 2019 and

8

September 2019 that show “a scheme whereby [Puorro] would exchange coaching and

9

advocacy on Mr. Williams’ behalf for confidential details about Cisco’s competitive
business.” FAC ¶ 130. Allegations showing that scheme—none of which are based on

11

United States District Court
Northern District of California

10

the “information and belief” condition that defendants contest in their briefing on this issue

12

and many of which are substantiated by text messages—include the following:

13

•

at Cisco. Mr. Williams provided a detailed response.” Id. ¶ 137.

14
15

On March 6, 2019, Puorro “asked Mr. Williams if ‘org changes’ had happened

•

On March 8, 2019, “Mr. Williams provided information to Mr. Puorro about

16

organizational changes at Cisco. Mr. Puorro requested further details . . .” Id.

17

¶ 140.

18

•

On March 11, 2019, Puorro texts Williams asking him “talk?” and, within a

19

minute, Williams responds “Yes sir.” Three hours later, Williams texts Puorro

20

stating “[t]ime is now to recruit. Let’s execute a project x like we did with

21

[another company] . . . I have a list.” Id. ¶ 141.

22

•

On March 22, 2019, four days following an in-person meeting with Puorro,

23

Williams “communicated highly confidential details about a matter at Cisco,

24

including [its] legal strategy, to Mr. Puorro.” Id. ¶¶ 142, 143.

25

•

On May 9, 2019, after learning that an unknown plaintiff employee knows

26

something about his role at Plantronics, Puorro tells Williams “I think we have a

27

leak in our India team. Anyway you can find out?” In less than an hour,

28

Williams, responds: “Ok . . . Have info . . . call me when it works.” Puorro and
38

Williams then talk over the phone. Id. ¶ 148.

1
2

•

On May 22, 2019, after Puorro introduced Williams to an unidentified third-

3

party consultant (later hired as a Plantronics employee), Williams texts Puorro

4

stating: “I’m having dinner with [consultant] tonight . . . Let me know if you want

5

me to pass on anything.” Id. ¶150.

6

•

On May 25, 2019, Williams texts Puorro stating: “I have something you

7

probably want to know . . . .Just ring me when you can sneak away – don’t

8

want to put this one in writing.” Id.¶ 151.

9

•

On June 28, 2019, shortly before Williams’ interview with executives for a
position at Plantronics, Puorro contacts Williams stating: “I heard more LR in

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United States District Court
Northern District of California

10

the BU’s . . . Wonder if [particular employee] is safe or not . . . Dig for me?” Id.

12

¶ 158.

13

•

“LR” (i.e., “limited restructuring” or layoffs). Williams responded. Id. ¶ 160.

14
15

On July 1, 2019, Puorro asked Williams if plaintiff had executed its planned

•

On August 19, 2019, Williams provides Puorro with the names of various

16

employees affected by the layoffs and who could be recruited to Plantronics.

17

Id. ¶ 163.

18

•

On August 27, 2019, Puorro texts Williams about an internal meeting among

19

plaintiff’s personnel, stating “How was UC break out yesterday?” Williams

20

responds suggesting a phone call and then stating “ping me later – don’t want

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to put anything on Text [sic] that I don’t want Cisco to have!” Id. ¶ 165.

22

•

On August 28, 2019, Williams sends pictures from the subject internal meeting

23

to Puorro. Such pictures include screenshots of presentations and images of a

24

new headset. Puorro asks “[d]oes it work with Zoom?” On that same day,

25

Williams provided Puorro with details from a presentation at that same meeting

26

concerning plaintiff’s competitive focus. Id. ¶ 167.

27
28

•

On September 3, 2019, Williams contacts Puorro informing Puorro that he is
meeting with an unidentified customer and suggesting that he could redirect
39

that customer’s business away from plaintiff. Id. ¶ 168.

1
2

•

On September 7, 2019, Puorro texts Williams asking about some product.

3

Williams responds “Talk? . . . Just in case big brother is watching…” Puorro

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responds “Calling.” Id. ¶ 169.

5

•

about plaintiff’s upcoming layoffs and an employee to recruit. Id. ¶ 170.

6
7

On September 12, 2019, Williams contacted Puorro providing him with details

•

On September 13, 2019, Williams contacts Puorro stating that he heard

8

“interesting rumors” about plaintiff’s collaboration platform and wanted to speak

9

with Puorro live. Puorro called Williams shortly after. Id. ¶ 171.

10

•

Plantronics executive) to provide information about Project x. Id. ¶ 172.

United States District Court
Northern District of California

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12

On September 16, 2019, Williams contacted Puorro (and an unidentified

•

On September 18, 2019, Williams contacted Puorro with information

13

concerning plaintiff’s upcoming layoffs, the status of a particular business unit,

14

and the name of a potential employee to recruit. Id. ¶ 174.

15

The court concludes that the above allegations show that Puorro received the

16

information relating to the various subject matter that Williams purportedly

17

misappropriated. The sensitive nature of the information shared is shown by the multiple

18

suggestions by Puorro and Williams that they take their communications off texting and to

19

a phone call. Their attempts at secrecy support a reasonable inference that Puorro knew

20

or should have known that the allegedly shared information was being passed along by

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Williams in violation of his PIIA. Given Puorro’s status as a former plaintiff employee

22

subject to a PIIA, FAC ¶ 309, the court may also reasonably infer that Puorro should

23

have known that Williams maintained a like agreement. Accordingly, plaintiff adequately

24

alleged that Puorro misappropriated information concerning the various subjects

25

purportedly shared by Williams.

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27

B.

Misappropriation by Plantronics

Plaintiff premises its trade secrets misappropriation claims against Plantronics

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40

1

upon the alleged conduct of each individual defendant. FAC ¶¶ 314-22, 335.12 To

2

support such claim premised upon Puorro’s alleged conduct, plaintiff advances theories

3

of both vicarious liability and direct liability. Id. ¶¶ 317-318. With respect to Williams’

4

alleged conduct, plaintiff advances only a theory of direct liability by ratification. Id. ¶ 321.

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The court analyzes each theory in turn.
1.

6

Vicarious Liability for Puorro’s Conduct

“Under the doctrine of respondeat superior, an employer is vicariously liable for the

7

torts of its employees committed within the scope of [their] employment.” SolarCity Corp.

9

v. Pure Solar Co., 2016 WL 11019989, at *5 (C.D. Cal. Dec. 27, 2016). Such liability

10

extends to “intentional torts, even if the employer has not authorized the employee to

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United States District Court
Northern District of California

8

perform the tortious activity, so long as there is a ‘causal nexus’ between the activity and

12

the employee’s work.” Id. Courts consider conduct “within the scope of employment

13

when it is performed, at least in part, to benefit the employer, though the employer may

14

forbid it.” Id.
Here, plaintiff adequately alleged that Puorro acted within the scope of his

15
16

employment at Plantronics when he misappropriated the information purportedly taken by

17

Williams. Significantly, as noted above, the subject information concerned, among other

18

things, the status of particular internal meetings, FAC ¶ 165, the status of particular

19

products, id. ¶¶ 167, 169, 171, and the names of employees affected by plaintiff’s layoffs

20

that Plantronics may recruit, id. ¶¶ 137, 140, 141, 158, 160, 163, 172. Given that

21

Plantronics and plaintiff operate in the same industry, the court may reasonably infer that

22

Puorro acquired the information purportedly taken by Williams to benefit Plantronics. As

23

a result, plaintiff adequately alleged that Plantronics misappropriated the information

24

purportedly taken by Williams under a theory of vicarious liability.

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26
27
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12

The court has concluded that plaintiff failed to adequately allege that the information
purportedly misappropriated by Chung and He maintained independent economic value.
As a result, to the extent plaintiff bases its trade secrets misappropriation claims against
Plantronics on the information allegedly misappropriated by either defendant, such claims
fail. Given that, the court need not analyze whether plaintiff adequately alleged that
Plantronics is vicariously or directly liable for the alleged conduct of Chung or He.
41

2.

1

Direct Liability for Ratifying Puorro’s and
Williams’ Conduct

2

“As an alternate theory to respondeat superior, an employer may be liable for an

3
4

employee's act where the employer either authorized the tortious act or subsequently

5

ratified an originally unauthorized tort.” Garcia ex rel. Marin v. Clovis Unified Sch. Dist.,

6

627 F. Supp. 2d 1187, 1201 (E.D. Cal. 2009). “The theory of ratification is generally

7

applied where an employer fails to investigate or respond to charges that an employee

8

committed an intentional tort.” Id.
Here, plaintiff alleges multiple instances where, over the course of interviewing for

9

a position at Plantronics, Williams communicated the subject information to various

11

United States District Court
Northern District of California

10

unidentified Plantronics executives. Despite such communications, those executives did

12

not reprimand Williams for (or otherwise caution him against) making such disclosures.

13

In some instances, those executives instead requested additional related information.

14

Allegations reflecting the above conduct by Plantronics’ executives include the following:

15

•

“In preparation for the June 28 interviews, Mr. Williams prepared a ‘discussion

16

guide’ PowerPoint presentation. This presentation contained Mr. Williams’

17

plans for accelerating sales at Poly, which included Cisco’s product strategy

18

and other financial data . . . Mr. Williams later emailed a version of this

19

presentation to Second Poly Executive at the executive’s personal email

20

address as opposed to the executive’s Poly email.” FAC ¶ 156.

21

•

“On July 31, 2019, Mr. Williams sent a message to Second Poly Executive in

22

which Mr. Williams proposed that it was ‘[t]ime to execute Project Liberator

23

while Cisco is further distracted, grow sales and gain marketshare.’ Project

24

Liberator is an ongoing Cisco sales strategy that Mr. Williams was involved

25

with developing and executing while at Cisco.” Id. ¶ 162.

26

•

“On August 22, 2019, Mr. Williams sent an email to Second Poly Executive’s

27

personal gmail account describing his vision for executing ‘Project x’ at Poly.

28

Project x is a Cisco sales strategy that Mr. Williams was involved with
42

1

developing and executing while at Cisco. . . . Mr. Williams discussed Project x

2

with Second Poly Executive. The Second Poly Executive asked Mr. Williams

3

to connect with Mr. Puorro and yet another Poly executive (‘Third Poly

4

Executive’) to ‘figure out next steps to execute the concept . . . .’ Mr. Williams

5

subsequently shared the details of Project x with Mr. Puorro and Third Poly

6

Executive.” Id. ¶ 164.
•

7

On September 16, 2019, “Mr. Williams communicated with Mr. Puorro and
Third Poly Executive about Project x. Mr. Williams conveyed to Second Poly

9

Executive that these were ‘Great conversations’ and asked Second Poly

10

Executive if anything further was required.” Subsequently, “Second Poly

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United States District Court
Northern District of California

8

Executive said that he would get the HR people ’in gear today.’ Second Poly

12

Executive asked Poly’s human resources department to move fast.” Id. ¶¶

13

172-173.

14

Plaintiff flagged each of these allegations in support of its position on this issue in

15

its opposition. Dkt. 51 at 22. In its reply, Plantronics failed to explain how or why any of

16

them fall short of ratification.13 Instead, Plantronics argues that the FAC’s

17

acknowledgement that “Mr. Williams certified to Poly [on October 12, 2019, FAC ¶ 181]

18

that he did not possess any Cisco confidential information when he was hired by Poly”

19

undermines any assertion that its executives had knowledge of Williams’ alleged conduct.

20

Dkt. 59 at 9. That argument is deflective. Whatever the certification’s contents, it does

21

not alter the executives’ alleged participation in, or knowledge of, the communications

22

bulleted above. Accordingly, plaintiff has adequately alleged that Plantronics

23

misappropriated the information purportedly taken by Williams under a theory of direct

24

liability by ratification as well.

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26
27
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Plantronic’s opening brief similarly neglects any such explanation. In it, Plantronics
summarily asserts that “plaintiff alleges nothing more than Mr. Williams sought
employment at Poly, and that Mr. Williams had conversations regarding his recruitment
with Mr. Puorro.” Dkt. 40 at 25
43
13

b.

1
2

Interference with Contract Claims

California Civil Code § 3426.7(b) “preempts common law claims that are based on

3

the same nucleus of facts as the misappropriation of trade secrets claim for relief.” K.C.

4

Multimedia, Inc. v. Bank of Am. Tech. & Operations, Inc., 171 Cal. App. 4th 939, 958

5

(2009).

6

In its oppositions, plaintiff argues that its intentional interference claims do not
arise from the same nucleus of facts as its trade secrets claims because Puorro induced

8

Williams to breach his PIIA and that inducement “stands irrespective of the trade secret

9

misappropriation.” Dkt. 51 at 24; Dkt. 52 at 16. To substantiate that assertion, plaintiff

10

explains that “Mr. Puorro engaged in a scheme to have Mr. Williams deliver information

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United States District Court
Northern District of California

7

about Cisco’s restructurings and provide information about Cisco employees,” id. (citing

12

FAC ¶¶ 6, 130), and also used Williams “as an agent for Poly within Cisco to recruit Cisco

13

employees not impacted by restructurings, and to take business from Cisco, thereby

14

causing Mr. Williams to violate his own PIIA,” id. (citing FAC ¶¶ 130, 137, 141, 148, 168,

15

309-10). Plaintiff then summarily asserts that “[t]hese allegations are separate, distinct,

16

and tied to the interference and the breach of the PIIA document as opposed to the

17

misappropriation of trade secrets.” Dkt. 51 at 25; Dkt. 52 at 16.

18

Here, the court concludes that plaintiff failed to allege an intentional interference

19

with contract claim that arises out of a set of operative facts distinct from those relied

20

upon to support its trade secret misappropriation claims. By its own argument in support

21

of these claims, plaintiff cites the same “scheme” by Puorro that it proffered to support its

22

trade secret misappropriation claims. Compare Dkt. 51 at 24 (citing FAC ¶ 130) with Dkt.

23

51 at 21 (citing FAC ¶ 130). While plaintiff cites certain communications by Williams

24

concerning potential employees available for recruitment, Dkt. 51 at 24 (citing FAC ¶¶

25

130, 137, 141), upcoming layoffs, id. (citing FAC ¶ 6), and existing clients potentially

26

available for poaching, id. (citing FAC ¶ 168), specifically in support of its intentional

27

interference claim, plaintiff relies upon the exact same sort of communications just a few

28
44

1

pages earlier in its opposition to substantiate its trade secrets misappropriation claims.14

2

Plaintiff may not have it both ways.
With respect to the remaining allegation cited by plaintiff in support of its claims—

3
4

namely that Puorro asked Williams to run-down some leak in Plantronic’s India team,

5

FAC ¶ 148—plaintiff fails to explain how or why it maintained a property right in

6

identifying which members of Plantronics were “telling everyone [Puorro is] now the guys

7

at Poly.” Bus. Sols., LLC v. Ganatra, 2019 WL 926351, at *6 (C.D. Cal. Jan. 7, 2019)

8

(“common law claims premised on the wrongful taking of information which does not

9

qualify as a trade secret are also superseded, unless the plaintiff identifies some law

10

which confers the plaintiff with property rights in the information.” ).
In any event, the very agreement that plaintiff bases its intentional interference

United States District Court
Northern District of California

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12

claims upon (Williams’ PIIA agreement), Dkt. 51 at 24, serves as the sole basis for

13

alleging the acquisition by “improper means” aspect of its trade secrets misappropriation

14

claims against both Puorro and Plantronics, Dkt. 52 at 15 (“Mr. Puorro knew that the

15

trade secrets were acquired through improper means, as having Mr. Williams disclose

16

the trade secrets would violate his duty to maintain confidentiality established in Mr.

17

Williams’ PIIA. [FAC] ¶ 309”); Dkt. 51 at 21 (same argument). Because plaintiff relies

18

heavily upon the breach of that agreement to substantiate the misappropriation element

19

of its trade secrets claims against Puorro and Plantronics, that agreement may not also

20

serve as the object of its intentional interference claim absent a clear explanation of how

21

its breach arises from a different set of facts. Plaintiffs fails to provide such explanation.

22

Given the above, the court concludes that plaintiff has failed to allege an intentional

23

interference with contract claim against both Puorro and Plantronics.

24
25
26
27
28

Id. at 13 (“With respect to Mr. Williams and Mr. Puorro, the FAC identifies categories of
information that Mr. Puorro induced Mr. Williams to misappropriate, including, for
example . . . information about Cisco’s Limited Restructurings (citing FAC ¶159) . . .
sales opportunities and customer lists . . . (citing FAC ¶ 258) . . . Within those categories
of information, Cisco alleges with particularity the subject matter of specific trade secrets
that Mr. Puorro induced Mr. Williams to take.”) (emphasis added); id. at 15 (“The FAC
alleges just these type of trade secrets. . . . [FAC] ¶ 141 (non-public employee-specific
information) . . .”) (emphasis added).
45
14

c.

1

Leave to Amend the Dismissed Claims

A district court “should grant the plaintiff leave to amend if the complaint can

2
3

possibly be cured by additional factual allegations,” however, dismissal without such

4

leave “is proper if it is clear that the complaint could not be saved by amendment.”

5

Somers, 729 F.3d at 960.
Here, the court will allow plaintiff leave to amend its trade secret misappropriation

6
7

claims against Chung and He only to allege the independent economic value of the

8

purportedly misappropriated trade secret information with the requisite specificity.

9

Plantronics and Puorro failed to advance any argument establishing that plaintiff cannot
allege a basis for its intentional interference with contract claims that is legally distinct

11

United States District Court
Northern District of California

10

from that proffered in support of its trade secrets misappropriation claims. Given that, the

12

court cannot conclude that plaintiff’s intentional interference with contract claims cannot

13

be saved by amendment and will allow plaintiff one opportunity to do so. Absent leave of

14

court or consent of defendants, plaintiff may not otherwise amend its pleadings. That

15

prohibition extends to any attempt by plaintiff to expand its allegations to information that

16

falls outside the subject matter previously found to have satisfied the sufficient

17

particularity pleading requirement.
CONCLUSION

18

For the above reasons, the court rules as follows:

19
20

•

Williams’ unopposed motion to compel arbitration and stay the instant litigation

21

with respect to the claims against him is GRANTED, his motion to stay the

22

instant litigation with respect to the claims against all other defendants is

23

DENIED, and his alternative motion to dismiss is TERMINATED.

24

•

amend as specified above.

25
26
27
28

Chung’s and He’s respective motions to dismiss are GRANTED with leave to

•

Plantronics’ and Puorro’s respective motions to dismiss are DENIED IN PART
and GRANTED IN PART with leave to amend as specified above.
The court allows plaintiff 28 days from the date of this order to file an amended
46

1

complaint accounting for the deficiencies in the dismissed claims. Failure to do so will

2

result in dismissal of the subject claims with prejudice. Upon the filing of any amended

3

complaint, plaintiff must also file a redline version clearly demarcating its changes from

4

the FAC.

5
6
7
8

IT IS SO ORDERED
Dated: May 26, 2020
/s/ Phyllis J. Hamilton
PHYLLIS J. HAMILTON
United States District Judge

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United States District Court
Northern District of California

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