Bona Fide Conglomerate, Inc. v. SourceAmerica et al
Filing
319
ORDER Granting in Part and Denying in Part 309 Counterdefendants' Motion to Dismiss SourceAmerica's Amended Counterclaims. The Court denies Counterdefendants' motion to dismiss SourceAmerica's CIPA and UCL claims to the extent described herein and grants Counterdefendant's motion to dismiss SourceAmerica's requests for damages under the UCL, attorney's fees, and punitive damages under the CIPA. Signed by Judge Gonzalo P. Curiel on 6/29/16. (dlg)
1
2
3
4
5
6
7
8
9
UNITED STATES DISTRICT COURT
10
SOUTHERN DISTRICT OF CALIFORNIA
11
12
BONA FIDE CONGLOMERATE, INC.,
Case No.: 3:14-cv-00751-GPC-DHB
Plaintiff,
13
14
15
ORDER GRANTING IN PART AND
DENYING IN PART
COUNTERDEFENDANTS’ MOTION
TO DISMISS SOURCEAMERICA’S
AMENDED COUNTERCLAIMS
v.
SOURCEAMERICA,
Defendant.
16
[ECF No. 309]
17
18
SOURCEAMERICA,
Counterclaimant.
19
20
21
22
23
v.
BONA FIDE CONGLOMERATE, INC.
and RUBEN LOPEZ,
Counterdefendants.
24
25
26
27
28
1
3:14-cv-00751-GPC-DHB
1
Before the Court is a motion to dismiss amended counterclaims filed by
2
Counterdefendants Bona Fide Conglomerate, Inc. and Ruben Lopez (collectively
3
“Counterdefendants”). (Mot. Dismiss, ECF No. 309.) The Parties have fully briefed the
4
motion. (ECF Nos. 316, 317.) The Court held a hearing on the motion on June 3, 2016.
5
(See ECF No. 310.) For the reasons set forth below, the Court GRANTS IN PART and
6
DENIES IN PART Bona Fide’s motion to dismiss.
7
FACTUAL BACKGROUND
8
This action arises out of the AbilityOne Program (“AbilityOne” or “Program”), a
9
government procurement system for goods and services from designated non–profits
10
(“Affiliates”), that substantially employs blind or severely disabled persons. (FAC ¶ 2,
11
ECF No. 128.) Services provided by Affiliates to the Federal Government include
12
custodial/janitorial, grounds maintenance, information technology, and total facilities
13
management. (Id. ¶ 50.) Plaintiff is one such Affiliate of the AbilityOne Program. (Id.
14
¶ 17.)
15
The AbilityOne Program has selected SourceAmerica as the Central Non–Profit
16
Agency (“CNA”) responsible for allocating procurement opportunities for services by the
17
severely disabled among its more than 1,200 member Affiliates. (Id. ¶¶ 4, 72.) As the
18
CNA, SourceAmerica develops opportunities and selects Affiliates, and then recommends
19
to an AbilityOne Commission that the service and Affiliate be added to a Procurement List.
20
(Id. ¶¶ 38, 44-45.) Once a service is added to the Procurement List, a federal agency must
21
procure that service from the designated Affiliate unless the Affiliate cannot meet the
22
agency’s demand. (Id. at ¶ 38.) The AbilityOne Commission ultimately determines which
23
services are added to the Procurement List based on SourceAmerica’s recommendations.
24
(Id. ¶¶ 44-45.) However, the AbilityOne Commission does not oversee SourceAmerica’s
25
allocation.
26
27
28
Bona Fide alleges a history of disputes between Plaintiff and SourceAmerica over
2
3:14-cv-00751-GPC-DHB
1
the allocation of AbilityOne opportunities. Plaintiff alleges filing a post–award bid protest
2
in the U.S. Court of Federal Claims in October 2010, challenging the government’s award
3
of a General Services Administration (“GSA”) contract to Defendant Opportunity Village
4
pursuant to SourceAmerica’s recommendation. (Id. ¶ 86.)
5
voidance of SourceAmerica’s recommendation and a re–solicitation of the GSA contract
6
opportunity, Plaintiff’s post–award bid protest was dismissed as moot. (Id.) Plaintiff then
7
commenced a second bid protest in April 2012, challenging the contract award again made
8
to Opportunity Village pursuant to SourceAmerica’s recommendation. (Id. ¶ 87.) Plaintiff
9
and SourceAmerica reached a settlement memorialized in a July 27, 2012 agreement
10
(“Settlement Agreement”) prior to conducting discovery. (Id. ¶ 88.) Under the terms of
11
the Settlement Agreement, SourceAmerica agreed to:
12
13
14
15
16
17
Following the voluntary
[U]se best efforts to provide that Bona Fide is treated objectively, fairly, and
equitably in its dealings with [SourceAmerica], with specific attention to
contract allocation . . . [SourceAmerica] will also use best efforts to provide
that Bona Fide is afforded equal access to services provided by
[SourceAmerica] including, regulatory assistance; information technology
support; engineering, financial and technical assistance; legislative and
workforce development assistance; communications and public expertise; and
an extensive training program.
18
(Id. ¶ 89) (alterations in original).
19
SourceAmerica would “reasonably monitor” Plaintiff’s participation in the AbilityOne
20
Program for three years. (Id. ¶ 90.) Plaintiff alleges it has “not been awarded a single new
21
contract by SourceAmerica since the Settlement Agreement was signed.” (Id. ¶ 93.) Bona
22
Fide alleges that it has not been awarded a single contract since the execution of the
23
Settlement Agreement. (Supp. Compl. at 2, ECF No. 267.) The Settlement Agreement
24
also provided that Plaintiff must notify the Office of General Counsel at SourceAmerica of
25
every AbilityOne opportunity to which Plaintiff responds. (Decl. of Kevin W. Alexander
26
(“Alexander Decl.”) ¶ 13, ECF No. 247–2.)
27
28
The Settlement Agreement also provided that
3
3:14-cv-00751-GPC-DHB
1
PROCEDURAL BACKGROUND
2
On April 1, 2014, Plaintiff filed the Complaint in this matter alleging antitrust
3
violations against various defendants and breach of contract against only Defendant
4
SourceAmerica. (ECF. No. 1.) Defendants filed ten separate motions to dismiss Plaintiff’s
5
Complaint. (ECF Nos. 23, 47, 48, 51, 53, 55, 66, 85, 86, 87.) On August 20, 2014, the
6
Court granted in part and denied in part Defendants’ motions to dismiss, leaving only the
7
breach of contract claim against SourceAmerica. (ECF No. 123.)
8
On September 19, 2014, Plaintiff filed a first amended complaint. (FAC, ECF. No.
9
128.) Defendants filed ten separate motions to dismiss the FAC. (ECF. Nos. 138, 140,
10
141, 143, 144, 148, 149, 150, 155, 159.) On January 6, 2015, the Court again dismissed
11
Plaintiff’s antitrust claims and denied SourceAmerica’s motion to dismiss the breach of
12
contract claim. (ECF No. 189.)
13
On October 30, 2015, Plaintiff filed a motion for leave to file a supplemental
14
complaint (ECF No. 246) and Defendant filed a motion for leave to file first amended
15
answer and counterclaims (ECF No. 247), which the Court granted (ECF No. 266). On
16
January 6, 2016, Bona Fide filed a supplemental complaint. (ECF No. 267.) On March
17
28, 2016, SourceAmerica filed amended counterclaims. (ECF No. 308.) SourceAmerica
18
has counterclaimed for (1) violations of California Penal Code Section 632(a) (“California
19
Invasion of Privacy Act” or “CIPA”); (2) unfair, unlawful and/or fraudulent business
20
practices in violation of California Business and Professions Code Section 17200; and (3)
21
breach of contract. (See Am. Countercl., ECF No. 308.) SourceAmerica alleges that Bona
22
Fide has attempted various means of circumventing SourceAmerica’s established NPA
23
recommendation process through wrongful conduct, including by: (1) making improper
24
loans to a General Services Administration (“GSA”) officer; (2) misleading a federal judge
25
into recommending Bona Fide for a procurement opportunity; (3) threatening and/or
26
intimidating SourceAmerica employees to recommend it for opportunities; (4) recording
27
4
28
3:14-cv-00751-GPC-DHB
1
confidential conversations with Jean Robinson, former General Counsel for
2
SourceAmerica, since at least 2013; (5) attempting improper witness tampering; (6) filing
3
baseless complaints and appeals of adverse recommendation determinations; (7)
4
intentionally causing substantial delays in the performance of AbilityOne Program
5
opportunities to the detriment of the Program’s worthwhile public purpose; (8) secretly,
6
improperly recording at least one meeting with David Dubinsky, then a Regional Director
7
for SourceAmerica and a California resident, while both parties were in California; and (9)
8
posting on WikiLeaks over thirty (30) hours of recordings by Lopez of his conversations
9
with Robinson, conversations between Lopez and Dubinsky, and transcripts of those
10
recordings commissioned by Bona Fide’s attorney, Daniel Cragg. (Id. ¶¶ 2–3.)
11
On April 4, 2016, Bona Fide filed the instant motion to dismiss SourceAmerica’s
12
amended counterclaims. (ECF No. 309.) On May 20, 2016, SourceAmerica filed an
13
opposition (ECF No. 316) and on May 27, 2016, Counterdefendants filed a reply (ECF No.
14
317). The Court held a hearing on the motion on June 3, 2016. (See ECF No. 318.)
15
16
LEGAL STANDARDS
I.
Rule 12(b)(1)
17
Under Rule 12(b)(1) of the Federal Rules of Civil Procedure, a defendant may seek
18
to dismiss a complaint for lack of jurisdiction over the subject matter. The federal court is
19
one of limited jurisdiction. See Gould v. Mutual Life Ins. Co. v. New York, 790 F.2d 769,
20
774 (9th Cir. 1986). As such, it cannot reach the merits of any dispute until it confirms its
21
own subject matter jurisdiction. See Steel Co. v. Citizens for a Better Environ., 523 U.S.
22
83, 95 (1998). When considering a Rule 12(b)(1) motion to dismiss, the district court is
23
free to hear evidence regarding jurisdiction and to rule on that issue prior to trial, resolving
24
factual disputes where necessary. See Augustine v. United States, 704 F.2d 1074, 1077
25
(9th Cir. 1983).
26
plaintiff’s allegations, and the existence of disputed facts will not preclude the trial court
27
5
28
In such circumstances, “[n]o presumptive truthfulness attaches to
3:14-cv-00751-GPC-DHB
1
from evaluating for itself the merits of jurisdictional claims.” Id. (quoting Thornhill
2
Publishing Co. v. General Telephone & Electronic Corp., 594 F.2d 730, 733 (9th Cir.
3
1979)). The party seeking to invoke jurisdiction has the burden of establishing that
4
jurisdiction exists. See Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377
5
(1994).
6
II.
Rule 12(b)(6)
7
A motion to dismiss under Rule 12(b)(6) tests the sufficiency of a complaint.
8
Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). Dismissal is proper where there is
9
either a “lack of a cognizable legal theory” or “the absence of sufficient facts alleged under
10
a cognizable legal theory.” Balisteri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir.
11
1990). To survive a motion to dismiss, the plaintiff must allege “enough facts to state a
12
claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 569
13
(2007). While a plaintiff need not give “detailed factual allegations,” a plaintiff must plead
14
sufficient facts that, if true, “raise a right to relief above the speculative level.” Id. at 545.
15
“[F]or a complaint to survive a motion to dismiss, the non–conclusory ‘factual content,’
16
and reasonable inferences from that content, must be plausibly suggestive of a claim
17
entitling the plaintiff to relief.” Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir.
18
2009).
19
In reviewing a motion to dismiss under Rule 12(b)(6), the court must assume the
20
truth of all factual allegations and must construe all inferences from them in the light most
21
favorable to the nonmoving party. Thompson v. Davis, 295 F.3d 890, 895 (9th Cir. 2002);
22
Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). Legal conclusions,
23
however, need not be taken as true merely because they are cast in the form of factual
24
allegations. Ileto v. Glock, Inc., 349 F.3d 1191, 1200 (9th Cir. 2003); W. Mining Council
25
v. Watt, 643 F.2d 618, 624 (9th Cir. 1981). Moreover, a court “will dismiss any claim that,
26
even when construed in the light most favorable to plaintiff, fails to plead sufficiently all
27
6
28
3:14-cv-00751-GPC-DHB
1
required elements of a cause of action.” Student Loan Mktg. Ass’n v. Hanes, 181 F.R.D.
2
629, 634 (S.D. Cal. 1998). If a plaintiff fails to state a claim, a court need not permit an
3
attempt to amend a complaint if “it determines that the pleading could not possibly be cured
4
by allegation of other facts.” Cook, Perkiss & Liehe, Inc. v. N. Cal. Collection Serv. Inc.,
5
911 F.2d 242, 247 (9th Cir. 1990).
6
DISCUSSION
7
The Court first addresses Counterdefendants’ Request for Judicial Notice (RJN, ECF
8
No. 309–2), then addresses Counterdefendants’ arguments regarding standing and the
9
sufficiency of Counterclaimant’s allegations.
10
I.
Request for Judicial Notice
11
Counterdefendants request that this Court judicially notice certain facts contained in
12
three documents: (1) the Settlement Agreement; (2) SourceAmerica’s Nonprofit Agency
13
Recommendation
14
SourceAmerica’s NPA Recommendation Process—Procedure for AbilityOne Opportunity
15
(the “Procedure”). SourceAmerica does not dispute the existence of these documents but
16
argues that Bona Fide improperly seeks judicial notice of the truth of the contents of these
17
documents and no portion of the UCL claim is premised on the terms of the Settlement
18
Agreement. (See RJN Obj., ECF No. 316–1.)
Policy—AbilityOne
Opportunity
(the
“Policy”);
and
(3)
19
Under Federal Rule of Evidence 201(b), a district court may take notice of facts not
20
subject to reasonable dispute that are capable of accurate and ready determination by resort
21
to sources whose accuracy cannot reasonably be questioned. Fed. R. Evid. 201(b); see also
22
Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001) (noting that the court may
23
take judicial notice of undisputed matters of public record), overruled on other grounds by
24
Galbraith v. County of Santa Clara, 307 F.3d 1119, 1125–26 (9th Cir. 2002). Under the
25
doctrine of incorporation by reference, the Court may consider on a Rule 12(b)(6) motion
26
not only documents attached to the complaint, but also documents whose contents are
27
7
28
3:14-cv-00751-GPC-DHB
1
alleged in the complaint, provided the complaint “necessarily relies” on the documents or
2
contents thereof, the document’s authenticity is uncontested, and the document’s relevance
3
is uncontested. Coto Settlement v. Eisenberg, 593 F.3d 1031, 1038 (9th Cir. 2010); see
4
Lee, 250 F.3d at 688–89. The purpose of this rule is to “prevent plaintiffs from surviving
5
a Rule 12(b)(6) motion by deliberately omitting documents upon which their claims are
6
based.” See Swartz v. KPMG LLP, 476 F.3d 756, 763 (9th Cir. 2007) (internal quotation
7
marks omitted).
8
SourceAmerica does not object to the authenticity of the Settlement Agreement but
9
argues that Counterdefendants have failed to authenticate the Policy and Procedure. (RJN
10
Obj. at 3, ECF No. 316–1.) The Court declines to take judicial notice of the Policy and
11
Procedure because SourceAmeric’s CIPA and UCL counterclaims do not rely on these
12
documents—it is Counterdefendants that rely on the policies to argue that because Bona
13
Fide has a right to request debriefs, SourceAmerica does not have standing to bring a UCL
14
claim based on Bona Fide’s debrief requests. The Court takes judicial notice of the
15
Settlement Agreement but not the truth of its contents as the relevant provisions are subject
16
to reasonable dispute, the resolution of which is central to the parties’ respective breach of
17
contract claims. See, e.g., San Luis Unit Food Producers v. United States, 772 F. Supp. 2d
18
1210, 1216 n. 1 (E.D. Cal. 2011) (“While the court cannot accept the veracity of the
19
representations made in the documents, it may properly take judicial notice of the existence
20
of those documents and of the “representations having been made therein.”); Knutson v.
21
Allis-Chalmers Corp., 358 F. Supp. 2d 983, 989 (D. Nev. 2005) (taking judicial notice of
22
court documents but not the disputed facts contained therein, finding that “the Court must
23
ascertain for itself the verity of the facts which Plaintiff alleges is proven by those
24
documents”).
25
//
26
//
27
28
8
3:14-cv-00751-GPC-DHB
1
II.
CIPA
2
SourceAmerica alleges that Counterdefendants recorded conversations with
3
SourceAmerica employees Jean Robinson and David Dubinsky without consent in
4
violation of the CIPA.
5
SourceAmerica lacks Article III and statutory standing to assert a CIPA claim.1
6
Specifically, Counterdefendants contend that SourceAmerica lacks standing to bring its
7
CIPA counterclaim because: (1) SourceAmerica is a non–California resident and therefore
8
has no standing to bring a CIPA claim; (2) SourceAmerica is “separate” from its employees
9
for purposes of CIPA and cannot bring a CIPA claim to which it was not a party; and (3)
10
(Am. Countercl. ¶¶ 55–58.)
Counterdefendants argue that
SourceAmerica’s dissemination claim is not legally cognizable. (Mot. Dismiss at 3–5.)
11
“The . . . injury required by Art. III may exist solely by virtue of ‘statutes creating
12
legal rights, the invasion of which creates standing.’” Lujan v. Defenders of Wildlife, 504
13
U.S. 555, 578 (1992) (quoting Warth v. Seldin, 522 U.S. 490, 500 (1975)). In cases
14
involving statutory rights, “the particular statute and the rights it conveys [ ] guide the
15
standing determination.” Donoghue v. Bulldog Investors Gen. P’ship, 696 F.3d 170, 178
16
(2d Cir. 2012); Robey v. Shapiro, Marianos & Cejda, L.L.C., 434 F.3d 1208, 1212 (10th
17
18
19
20
21
22
23
24
25
26
27
28
1
Although Counterdefendants frame their motion to dismiss the CIPA claim as a motion
to dismiss under Rule 12(b)(1), Counterdefendants’ arguments attack both
SourceAmerica’s constitutional and statutory standing. Counterdefendants argue that there
are constitutional limitations on the legislative power to confer standing: (1) “a plaintiff
‘must be among the injured, in the sense that she alleges the defendants violated her
statutory rights’”; and (2) “the statutory right at issue must protect against the individual,
rather than collective harm.’” (Mot. Dismiss at 3, ECF No. 309 (citing Tourgeman v.
Collins Fin. Servs., 755 F.3d 1109, 1115 (9th Cir. 2014).) Specifically, Counterdefendants
state that their motion challenges the “particularity” requirement. (Reply at 5, ECF No.
317.) Counterdefendants’ specific arguments in the motion to dismiss, however, largely
center on SourceAmerica’s lack of standing under the CIPA. The Court will address both
Article III and statutory standing under CIPA.
9
3:14-cv-00751-GPC-DHB
1
Cir. 2006) (where a court is “dealing with legal rights created by Congress . . . the ‘injury
2
in fact’ analysis for purposes of Article III is directly linked to the question of whether [the
3
plaintiff] has suffered a cognizable statutory injury”).
4
A.
5
Statutory standing can be established by pleading a violation of a right conferred by
6
statute so long as the plaintiff alleges “a distinct and palpable injury to himself, even if it
7
is an injury shared by a large class of other possible litigants.” Warth, 522 U.S. at 501.
8
Whether or not a plaintiff has stated a basis for statutory standing is tested under Rule
9
12(b)(6) rather than Rule 12(b)(1). Maya v. Centex Corp., 658 F.3d 1060, 1067 (9th Cir.
10
Statutory Standing
2011).
11
CIPA, Cal. Penal Code § 630 et seq., California’s anti–wiretapping and anti–
12
eavesdropping statute, prohibits unauthorized interceptions of communications in order “to
13
protect the right of privacy.” Cal. Penal Code § 630. Section 632 prohibits unauthorized
14
electronic eavesdropping on confidential conversations. See id. § 632(a). To state a claim
15
under section 632, a plaintiff must allege an electronic recording of or eavesdropping on a
16
confidential communication, and that not all parties consented to the eavesdropping.
17
Flanagan v. Flanagan, 41 P.3d 575, 577 (Cal. 2002).
18
Bona Fide first argues that SourceAmerica is not “among the injured” and therefore
19
lacks standing because it is a non–California resident and is merely asserting its employees’
20
personal rights. (Mot. Dismiss at 3–4, ECF No. 309.) Thus, the issue presented is whether
21
SourceAmerica, an out–of–state corporation, has a right of action under the CIPA against
22
a California defendant for unlawful recording of its employees.2 Bona Fide relies on
23
24
25
26
27
28
2
SourceAmerica disputes Bona Fide’s contention that SourceAmerica is not a California
resident because it has offices in California and David Dubinsky, a SourceAmerica
employee who was allegedly recorded by Lopez, is a California resident. (Opp’n at 2 n. 3,
10
3:14-cv-00751-GPC-DHB
1
Kearney v. Salomon Smith Barney, 39 Cal. 4th 95 (2006), specifically on the court’s
2
recognition that CIPA’s express legislative purpose is “to protect the right of privacy of the
3
people of this state,” to support the argument that the CIPA protects only California
4
residents. (Mot. Dismiss at 4, ECF No 309.) Kearney held that a non–California defendant
5
cannot be held liable to a non–California plaintiff for violations of the CIPA. First the
6
California Supreme Court engaged in a choice–of–law analysis and determined that CIPA
7
rather than Georgia law applied on the facts at issue. See Kearney, 39 Cal. 4th at 115–28.
8
In applying CIPA, the court found that CIPA can apply in situations involving California
9
plaintiffs—whose privacy rights the California legislature specifically intended to
10
protected—and out–of–state defendants. However, the Kearney court did not decide
11
whether a California defendant could be held liable to non–California plaintiffs under the
12
CIPA.
13
As to non–California Plaintiffs asserting claims against a California defendant where
14
the alleged violations occurred in California, the Court agrees with the reasoning set forth
15
in Valentine v. NebuAd, Inc., 804 F. Supp. 2d 1022, 1028 (N.D. Cal. 2011), which declined
16
to read the CIPA’s statement of legislative purpose as limiting standing to California
17
residents where the statute expressly allows an action to be brought by “any person”
18
without a residency requirement. “A legislative purpose that articulates an interest in
19
protecting those within California is not inconsistent with also allowing non–Californians
20
to pursue claims against California residents.” Id. Section 637.2 (“Civil action by persons
21
injured; injunction”) provides that an action under the CIPA can be brought by “[a]ny
22
person who has been injured by a violation of this chapter [Chapter 1.5 Invasion of Privacy]
23
. . . against the person who committed the violation . . . .” Cal. Pen. Code § 637.2. Section
24
25
26
27
28
ECF No. 316.) However, SourceAmerica has not provided any legal authority to support
its position.
11
3:14-cv-00751-GPC-DHB
1
632(b) defines the term “person” to include corporations as perpetrators of the offenses
2
defined in section 632(a). Id. § 632(b). The purpose of the Invasion of Privacy chapter is
3
to deter wrongful conduct, a purpose that “could be easily circumvented if it were not an
4
offense to eavesdrop upon or record confidential communications of corporations.” Ion
5
Equip. Corp. v. Nelson, 110 Cal. App. 3d 868, 880 (Ct. App. 1980). “Since a corporation
6
is considered a “person” which may be held liable for invasion of privacy pursuant to Penal
7
Code section 632, subdivision (a)” it is reasonable that “the Legislature intended the words
8
‘any person’ stated in section 637.2, subdivision (a), to include corporations as well.” Id.
9
To conclude otherwise would imply that the Legislature intended to subject out–of–state
10
parties to the requirements of CIPA while simultaneously allowing California residents to
11
violate the CIPA “with impunity with respect to out–of–state individuals and entities”
12
within its borders, “a result this Court declines to reach.” Valentine, 806 F. Supp. at 1027.
13
Here, SourceAmerica alleges that Lopez made at least one recording of Robinson
14
while Lopez was located in California (Am. Countercl. ¶ 31, ECF No. 308) and at least one
15
recording of a meeting with Dubinsky while both he and Dubinsky were in California (id.
16
¶ 32). California Courts have recognized that “with respect to regulating or affecting
17
conduct within its borders, the place of the wrong has the predominant interest.” See
18
Hernandez v. Burger, 102 Cal.App.3d 795, 802 (1980), cited with approval by Abogados
19
v. AT & T, Inc., 223 F.3d 932, 935 (9th Cir. 2000). The Court therefore finds that
20
SourceAmerica has statutory standing to bring a CIPA claim to the extent the relevant
21
conduct (recordings) took place in California.
22
Counterdefendants also contend that SourceAmerica fails to allege it was a “party”
23
to any of the recorded conversations. (Mot. Dismiss at 5, ECF No. 309.) SourceAmerica
24
alleges that Lopez illegally recorded conversations with Robinson and Dubinsky in their
25
capacities as SourceAmerica employees. (Am. Countercl. ¶¶ 28, 32, 57, ECF No. 308.)
26
While a corporation may not pursue a common law action for invasion of privacy, it may
27
12
28
3:14-cv-00751-GPC-DHB
1
bring an action for violation of the Privacy Act. See Coulter v. Bank of Am., 28 Cal. App.
2
4th 923, 930 (1994) (holding that a bank has standing to assert a claim for violation of the
3
CIPA based on a recording of a bank employee). California courts have recognized a
4
limited corporate right to privacy. See Roberts v. Gulf Oil Corp., 147 Cal. App. 3d 770,
5
791 (Ct. App. 1983) (holding that corporations do not have a right to privacy under the
6
California Constitution, nor a fundamental right to privacy, but do have a “general right to
7
privacy”). The Roberts court recognized two factors for determining the strength of a
8
business entity’s privacy right: (1) the strength of the nexus between the entity and the
9
human beings, and (2) the context of the controversy. Id. at 797. Here, Lopez was
10
allegedly recording SourceAmerica employees—including its former general counsel and
11
compliance officer—regarding SourceAmerica’s internal matters.
12
Countercl. ¶¶ 32–25, 39–42, ECF No. 308.) In the context of the circumstances giving rise
13
to this litigation, the Court finds that SourceAmerica has standing to maintain a CIPA
14
action based on surreptitious recordings of its employees in California.
(See, e.g., Am.
15
Counterdefendants also argue that SourceAmerica’s “dissemination claim”—
16
SourceAmerica’s allegations of harm resulting from Lopez’s recordings—is not legally
17
cognizable. (Mot. Dismiss at 4, ECF No. 309.) SourceAmerica responds that it has not
18
made a dissemination claim and that there is no such thing as a dissemination claim under
19
the CIPA. (Opp’n at 10, ECF No. 316.) The Court agrees and finds Counterdefendants’
20
arguments regarding the issue moot.
21
B.
22
Counterdefendants further assert that SourceAmerica lacks constitutional standing
23
to bring a CIPA claim because SourceAmerica cannot show it actually had rights under
24
CIPA to claim Counterdefendants violated those statutory rights. (See Reply at 2, ECF No.
25
317.) To satisfy Article III standing, a plaintiff must allege: (1) injury–in–fact, (2) wherein
26
injury is fairly traceable to the challenged action of the defendant, and (3) it is likely (not
27
13
28
Injury in Fact Under Article III
3:14-cv-00751-GPC-DHB
1
merely speculative) that injury will be redressed by a favorable decision. Friends of the
2
Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167, 180–81 (2000); Lujan, 504
3
U.S. at 560–61. At the pleading stage, the plaintiff must “clearly . . . allege facts
4
demonstrating” each element. A suit brought by a plaintiff without Article III standing is
5
not a “case or controversy,” and an Article III federal court therefore lacks subject matter
6
jurisdiction over the suit. Warth, 422 U.S. at 518.
7
“Injury in fact is a constitutional requirement, and ‘[i]t is settled that Congress cannot
8
erase Article III’s standing requirements by statutorily granting the right to sue to a plaintiff
9
who would not otherwise have standing.’” Spokeo, Inc. v. Robins, 136 S.Ct. 1540, 1547–
10
48 (2016) (internal citations omitted). To establish injury in fact, a plaintiff must show that
11
he or she suffered “an invasion of a legally protected interest” that is “concrete and
12
particularized” and “actual or imminent, not conjectural or hypothetical.” Lujan, 504 U.S.,
13
at 560. Counterdefendants’ motion challenges the particularity requirement. (Reply at 5,
14
ECF No. 317.) For an injury to be “particularized,” it “must affect the plaintiff in a personal
15
and individual way.” Id., n. 1; see also Whitmore v. Arkansas, 495 U.S. 149, 155 (1990)
16
(“The complainant must allege an injury to himself that is “distinct and palpable.”); Valley
17
Forge Christian Coll. v. Americans United for Separation of Church & State, Inc., 454
18
U.S. 464, 472 (1982) (“Art. III requires the party who invokes the court’s authority to
19
‘show that he personally has suffered some actual or threatened injury as a result of the
20
putatively illegal conduct of the defendant.’”).
21
An injury need not be “tangible,” however. Id. “[B]ecause Congress is well
22
positioned to identify intangible harms that meet minimum Article III requirements, its
23
judgment is also instructive and important” and Congress may “elevat[e] to the status of
24
legally cognizable injuries concrete, de facto injuries that were previously inadequate in
25
law.” Id. (internal quotations omitted). A violation of a statutory right is usually a
26
sufficient injury in fact to confer Article III standing. See Edwards v. First Am. Corp., 610
27
14
28
3:14-cv-00751-GPC-DHB
1
F.3d 514, 517 (9th Cir. 2010) (“Essentially, the standing question in such cases is whether
2
the constitutional or statutory provision on which the claim rests properly can be
3
understood as granting persons in the plaintiff’s position a right to judicial relief.”)
4
Nonetheless, “the requirement of injury in fact is a hard floor of Article III jurisdiction that
5
cannot be removed by statute.” Summers v. Earth Island Inst., 555 U.S. 488, 497 (2009).
6
As the Supreme Court recently clarified, a plaintiff does not automatically satisfy the
7
injury–in–fact requirement “whenever a statute grants a person a statutory right and
8
purports to authorize that person to sue to vindicate that right.” Spokeo, 136 S.Ct. at 1548.
9
“Article III standing requires a concrete injury even in the context of a statutory violation.”
10
Id. At the same time, “the violation of a procedural right granted by statute can be sufficient
11
in some circumstances to constitute injury in fact. Id. at 1549. In such cases a plaintiff
12
“need not allege any additional harm beyond the one Congress has identified.” Id. (internal
13
citations and quotations omitted).
14
The CIPA prohibits unauthorized interceptions of communications in order “to
15
protect the right of privacy.” Cal. Penal Code § 630; see also Flanagan, 41 P.3d at 581
16
(the “legislative purpose of the Privacy Act” is to “giv[e] greater protection to privacy
17
interests”). Specifically, section 632 prohibits unauthorized electronic eavesdropping on
18
confidential conversations. See Cal. Penal Code § 632(a). The Court has determined that
19
SourceAmerica has statutory standing to bring a CIPA claim where the alleged wrongful
20
conduct occurred in California. Compared to Spokeo, a violation of the CIPA involves
21
more tangible rights than a technical violation of the Fair Credit Reporting Act of 1970
22
(FRCA). Whereas “[a] violation of one of the FCRA’s procedural requirements may result
23
in no harm,” such as reporting of “an incorrect zip code,” Spokeo, 136 S.Ct. at 1549, a
24
violation of CIPA implies a violation of privacy rights. CIPA may very well fall within
25
“the violation[s] of [] procedural rights[s] granted by statute . . . sufficient in some
26
circumstances to constitute injury in fact” and for which a plaintiff “need not allege actual
27
15
28
3:14-cv-00751-GPC-DHB
1
harm beyond the invasion of that private right.” Id. See also In re Google Inc., No. 13-
2
MD-02430-LHK, 2013 WL 5423918, at *17 (N.D. Cal. Sept. 26, 2013) (finding that the
3
allegation of a violation of CIPA, like an allegation of the violation of the Wiretap Act, is
4
sufficient to confer standing without any independent allegation of injury where both
5
authorize an award of statutory damages any time a defendant violates the provisions of
6
the statute without any need to show actual damages).
7
Here,
SourceAmerica
alleges
that
Counterdefendants
secretly
recorded
8
SourceAmerica’s employees to obtain confidential and privileged employees to use against
9
SourceAmerica. (See, e.g., Am. Countercl. ¶¶ 28, 29, 32, 38, 39, 42.) The alleged harm
10
affects SourceAmerica in a personal and particularized way as the communications at issue
11
pertain to SourceAmerica’s confidential and privileged information.
12
SourceAmerica has alleged a concrete and particularized injury—violation of its privacy
13
rights—that is actual and imminent. Beyond that, SourceAmerica has alleged other
14
personal and discrete harm, including having to spend significant resources to respond to
15
Lopez’s improper recordings. (Am. Countercl. ¶ 61, ECF No. 308.) Therefore, the Court
16
finds that SourceAmerica has sufficiently alleged an injury in fact under Article III.
17
As such,
In light of the foregoing, the Court finds that SourceAmerica has standing to bring a
18
CIPA claim to the extent the relevant conduct (recordings) took place in California.
19
III.
UCL
20
SourceAmerica alleges Counterdefendants violated California’s Unfair Competition
21
Law (“UCL”) by engaging in unlawful, unfair and fraudulent business acts and practices
22
in an effort to pressure SourceAmerica to recommend Bona Fide for AbilityOne Program
23
opportunities for which Bona Fide was not suitable. (Am. Countercl. ¶¶ 63–69, ECF No.
24
308.) Counterdefendants argue SourceAmerica’s UCL claim should be dismissed because
25
(1) SourceAmerica lacks statutory standing, and (2) the UCL is partially barred by the
26
Settlement Agreement. (Mot. Dismiss at 6–9, ECF No. 309.)
27
28
16
3:14-cv-00751-GPC-DHB
1
A.
2
California’s UCL “prohibits any unfair competition, which means ‘any unlawful,
3
unfair or fraudulent business act or practice.’” In re Pomona Valley Med. Group, 476 F.3d
4
665, 674 (9th Cir.2007) (quoting Cal. Bus. & Prof. Code § 17200, et seq.). The UCL’s
5
coverage is “sweeping,” and its standard for wrongful business conduct is “intentionally
6
broad.” In re First Alliance Mortg. Co., 471 F.3d 977, 995 (9th Cir.2006). Each prong—
7
fraudulent, unfair, and unlawful—is independently actionable. Lozano v. AT & T Wireless
8
Servs., Inc., 504 F.3d 718, 731 (9th Cir. 2007); Cel–Tech Communications, Inc. v. Los
9
Angeles Cellular Telephone Co., 20 Cal.4th 163, 185 (1999).
Statutory Standing
10
“[T]o pursue either an individual or a representative claim under the California
11
unfair competition law,” a plaintiff “must have suffered an ‘injury in fact’ and ‘lost money
12
or property as a result of such unfair competition.’” Hall v. Time Inc., 158 Cal. App. 4th
13
847, 849 (2008). California courts have distinguished the UCL standing requirement as
14
more stringent than the federal Article III standing requirement, noting that “[w]hereas a
15
federal plaintiff’s ‘injury in fact’ may be intangible and need not involve lost money or
16
property, Proposition 64, in effect, added a requirement that a UCL plaintiff’s ‘injury in
17
fact’ specifically involves ‘lost money or property.’” Troyk v. Farmers Grp., Inc., 171 Cal.
18
App. 4th 1305, 1348, n. 31 (2009). Conversely, “[i]f a party has alleged or proven a
19
personal, individualized loss of money or property in any nontrivial amount, he or she has
20
also alleged or proven injury in fact.” Kwikset Corp. v. Super. Ct., 51 Cal. 4th 310, 325
21
(2011). With respect to standing under the UCL the Kwikset court held:
22
26
There are innumerable ways in which economic injury from unfair
competition may be shown. A plaintiff may (1) surrender in a transaction
more, or acquire in a transaction less, than he or she otherwise would have;
(2) have a present or future property interest diminished; (3) be deprived of
money or property to which he or she has a cognizable claim; or (4) be
required to enter into a transaction, costing money or property, that would
otherwise have been unnecessary. Neither the text of Proposition 64 nor the
27
17
23
24
25
28
3:14-cv-00751-GPC-DHB
1
2
3
ballot arguments in support of it purport to define or limit the concept of ‘lost
money or property,’ nor can or need we supply an exhaustive list of the ways
in which unfair competition may cause economic harm.
Id. at 322.
4
SourceAmerica alleges that Counterdefendants violated the UCL by engaging in
5
various misconduct, including loaning money to a federal officer supervising Bona Fide
6
(Am. Countercl. ¶¶ 19–22, 66, ECF No. 308), threatening a SourceAmerica employee (id.
7
¶¶ 25–27, 66), attempting to tamper with a witness (id. ¶¶ 34–37), and violating CIPA (id.
8
¶¶ 28–33, 66). SourceAmerica alleges that these wrongful acts “directly and proximately”
9
caused SourceAmerica substantial injury, including: (1) harm to SourceAmerica’s
10
reputation, (2) damages due to the money spent providing debriefs requested by Bona Fide
11
in bad faith, and (3) litigation and other legal costs relating to the media and expanded
12
federal government investigations that it would not have incurred but for Bona Fide’s
13
conduct. (Id. ¶ 68.)
14
A UCL plaintiff must “establish a loss or deprivation of money or property sufficient
15
to qualify as injury in fact, i.e., economic injury.” Kwikset, 51 Cal. 4th at 322. With respect
16
to reputational harm, the Court agrees that Stewart v. Rolling Stone LLC, 181 Cal. App. 4th
17
664, 690 (2010), did not hold that reputational injury is not an economic injury but neither
18
does SourceAmerica provide any legal authority where a court has determined that an
19
intangible harm such as reputational harm qualifies an economic harm under the UCL.
20
With respect to harm resulting from debriefs requested by Bona Fide in bad faith,
21
Counterdefendants argue that SourceAmerica fails to meet the causation requirement under
22
the UCL because SourceAmerica has a policy of providing debriefs to NPAs that are not
23
recommended for a particular opportunity. The “causal connection is broken when a
24
complaining party would suffer the same harm whether or not a defendant complied with
25
the law.” Kwikset, 51 Cal. 4th at 322. SourceAmerica argues that debriefs are “time–
26
consuming and intended to be utilized in good faith for the purpose of improving
27
18
28
3:14-cv-00751-GPC-DHB
1
submission” and SourceAmerica would not suffer the same harm if Bona Fide only
2
submitted good–faith debrief requests. The Court agrees that this is a sufficient economic
3
injury as debriefs are not automatic but instead must be first requested by NPAs. The Court
4
likewise finds that costs incurred as a result of Counterdefendant’s alleged conduct “that
5
would otherwise have been unnecessary” (e.g., in connection with SourceAmerica’s
6
dealings with the press and media) are sufficient to establish standing.
7
B.
8
Counterdefendants argue that SouceAmerica’s UCL counterclaim is partially barred
9
due to a release in the July 27, 2012 Settlement Agreement between the parties. (Mot.
10
Dismiss at 7–9, ECF No. 309.) SourceAmerica responds that the factual allegations
11
pertaining to its UCL claim are included “for demonstrative purposes” and other alleged
12
wrongful conduct, including Lopez’s recordings in violation of CIPA, occurred after that
13
date. (Opp’n at 15–16.) The Court agrees that, assuming the Settlement Agreement bars
14
pre–July 27, 2012 conduct, SourceAmerica’s allegations of conduct occurring after the
15
Settlement Agreement are sufficient to state a UCL claim, including secret recordings in
16
violation of CIPA commencing in May 2013 (see Am. Countercl. ¶¶ 29–42, ECF No. 308)
17
and attempted witness tampering (see id. ¶¶ 42–46).)
18
IV.
19
Settlement Agreement
Damages Claims
Counterdefendants also challenge damages sought by SourceAmerica.
(Mot.
20
Dismiss at 9–12, ECF No. 309.) First, Counterdefendants argue that SourceAmerica fails
21
to allege “actual” damages under the CIPA because its allegations relate to damages
22
resulting from disclosure of communications and not from the recordings themselves. (Id.
23
at 10.) SourceAmerica is seeking, as alternatives, actual damages and statutory damages
24
under the CIPA and the Court finds that SourceAmerica has alleged statutory damages to
25
withstand a motion to dismiss. See Ion Equip., 110 Cal. App. 3d at 882 (“The statute also
26
provides that it is not a necessary prerequisite to an action pursuant to this section that
27
19
28
3:14-cv-00751-GPC-DHB
1
plaintiff has suffered, or been threatened with actual damages . . . actual damages are not a
2
necessary prerequisite to an action pursuant to section 637.2.”). Counterdefendants also
3
argue that SourceAmerica may not recover damages on its UCL claim as a matter of law
4
and that SourceAmerica failed to plausibly allege entitlement to attorney’s fees, which
5
SourceAmerica does not oppose. The Court agrees and GRANTS Counterdefendants’
6
motion with respect to UCL damages and attorney’s fees. Lastly, Counterdefendants
7
oppose SourceAmerica’s request for punitive damages under the CIPA. SourceAmerica
8
does not cite and the Court is not aware of any cases where punitive damages have been
9
awarded under the CIPA. Therefore, the Court GRANTS Counterdefendants’ motion to
10
dismiss with respect to punitive damages.
11
CONCLUSION
12
For the foregoing reasons, the Court hereby GRANTS IN PART and DENIES IN
13
PART Counterdefendants’ motion to dismiss without prejudice. The Court DENIES
14
Counterdefendants’ motion to dismiss SourceAmerica’s CIPA and UCL claims to the
15
extent described herein and GRANTS Counterdefendant’s motion to dismiss
16
SourceAmerica’s requests for damages under the UCL, attorney’s fees, and punitive
17
damages under the CIPA.
18
19
IT IS SO ORDERED.
Dated: June 29, 2016
20
21
22
23
24
25
26
27
28
20
3:14-cv-00751-GPC-DHB
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?