Strategic Operations, Inc. v. Joseph et al

Filing 24

ORDER granting in part and denying in part 17 Motion to Dismiss. Signed by Judge Janis L. Sammartino on 5/07/2019. (jpp)

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Case 3:17-cv-01539-JLS-WVG Document 24 Filed 05/07/19 PageID.375 Page 1 of 12 1 2 3 4 5 6 7 8 9 UNITED STATES DISTRICT COURT 10 SOUTHERN DISTRICT OF CALIFORNIA 11 12 STRATEGIC OPERATIONS, INC., Case No.: 17-CV-1539 JLS (WVG) Plaintiff, 13 14 15 17 BREA K. JOSEPH, an individual; KASEY EROKHIN, an individual; KBZ FX, an unknown business entity; and KBZ FX, INC., a California corporation, 18 ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS v. Defendants. 16 (ECF No. 17) 19 20 Presently before the Court is Defendants Brea K. Joseph and KBZ FX, Inc.’s (the 21 “Movants”) Motion to Dismiss the Amended Complaint for Failure to State a Claim Under 22 Fed. R. Civ. P. 12(b)(6) (“Mot.,” ECF No. 17). Also before the Court is Plaintiff Strategic 23 Operations, Inc.’s (“StOps”) Response in Opposition to (“Opp’n,” ECF No. 19) and the 24 Movants’ Reply in Support of (“Reply,” ECF No. 21) the Motion. The Court vacated the 25 hearing and took the Motion under submission without oral argument pursuant to Civil 26 Local Rule 7.1(d)(1). See ECF No. 20. Having considered the Movants’ and Plaintiff’s 27 arguments and the law, the Court GRANTS IN PART AND DENIES IN PART the 28 Movants’ Motion as follows. 1 17-CV-1539 JLS (WVG) Case 3:17-cv-01539-JLS-WVG Document 24 Filed 05/07/19 PageID.376 Page 2 of 12 BACKGROUND 1 1 2 Plaintiff is the exclusive licensee of United States Patent Nos. 8,840,403 (the “’403 3 Patent”), 9,336,693 (the “’693 Patent”), and 9,916,774 (the “’774 Patent”) (together, “the 4 Patents-in-Suit”). FAC ¶ 18. The Patents-in-Suit “pertain to devices and methods for 5 simulating realistic-looking, dynamic injuries that a person may receive during a traumatic 6 event.” Id. ¶ 19. For example, the devices claimed in the Patents-in-Suit “can be worn by 7 ‘role players’ during a simulated traumatic event to mimic a plurality of different combat- 8 related bleeding wounds and internal injuries and allow first responders to perform medical 9 treatment on the same.” Id. 10 Mses. Joseph and Erokhin were previously employed by Plaintiff as injury 11 simulation makeup artists. Id. ¶ 20. During their employment, Mses. Joseph and Erokhin 12 were exposed to role players wearing and using the “Cut Suit,” which is one of Plaintiff’s 13 human-worn trauma and medical training products. Id. ¶¶ 20–21. The “Cut Suit” embodies 14 or uses one or more inventions claimed in the Patents-in-Suit. Id. ¶ 20. Plaintiff previously 15 sued Mses. Joseph and Erokhin for breach of loyalty, interference with employment 16 relationship, and violation of the Uniform Trade Secrets Act. Id. ¶ 23. As part of the 17 settlement agreement in that case, Mses. “Joseph and Erokhin agreed to refrain from using 18 Strategic Operations’ confidential and proprietary technology and trade secret information 19 for any purpose.” Id. ¶ 23. 20 In June 2011, Mses. Joseph and Erokhin left StOps and formed KBZ FX, which is 21 “a special effects medical training support system” providing “injury simulations.” Id. 22 ¶ 25. One of KBZ FX’s products is a “trauma training kit” (the “TTK”), which is “a human 23 body replica suit used to perform actual treatments on for medical training.” Id. ¶ 26. 24 Plaintiff alleges that the TTK infringes the Patents-in-Suit. See id. ¶¶ 41, 52, 54. Plaintiff 25 also alleges causes of action for breach of a nondisclosure agreement that Mses. Joseph 26 27 28 1 The facts alleged in Plaintiff’s operative First Amended Complaint (“FAC,” ECF No. 16) are accepted as true for the purpose of this Motion. See Vasquez v. Los Angeles Cnty., 487 F.3d 1246, 1249 (9th Cir. 2007) (holding that, in ruling on a motion to dismiss, the Court must “accept all material allegations of fact as true”). 2 17-CV-1539 JLS (WVG) Case 3:17-cv-01539-JLS-WVG Document 24 Filed 05/07/19 PageID.377 Page 3 of 12 1 and Erokhin each executed at the outset of their employment with StOps, see id. ¶¶ 59–66, 2 and unfair competition in violation of California Business and Professions Code sections 3 17200 et seq., based on Defendants’ alleged patent infringement and use of StOps’ 4 confidential and proprietary technology and trade secret information. See id. ¶¶ 68–72. 5 Finally, Plaintiff alleges “[o]n information and belief” that “KBZ FX, Inc. was formed as 6 a direct result of the threat of this litigation, and is merely the alter-ego of Defendants 7 Erokhin and Joseph.” Id. ¶ 8. 8 On July 28, 2017, StOps filed a Complaint against Defendants, alleging causes of 9 action of patent infringement, breach of nondisclosure agreement, and unfair competition 10 in violation of California Business and Professions Code section 17200 (“UCL”). See 11 generally ECF No. 1. StOps filed a Waiver of Service of Summons as to the Movants on 12 February 27, 2018.2 See ECF No. 6. The Movants then moved to dismiss Plaintiff’s patent 13 infringement cause of action and alter ego allegations pursuant to Federal Rule of Civil 14 Procedure 12(b)(6) on April 30, 2018. See generally ECF No. 10. 15 On August 13, 2018, the Court granted the motion. See generally ECF No. 15. As 16 for the patent infringement cause of action, the Court concluded that Plaintiff had not 17 sufficiently alleged that the Movants had continued to make, use, sell, or offer for sale the 18 TTK pursuant to 35 U.S.C. § 271(a) because the allegation was conclusory and had no 19 factual support. Id. at 5–6. Regarding Plaintiff’s alter ego allegations, the Court similarly 20 concluded that Plaintiff had not sufficiently pleaded either element of alter ego liability. 21 Id. at 7–8. The Court granted Plaintiff leave to amend its complaint. Id. at 8. 22 Plaintiff filed its operative First Amended Complaint on September 12, 2018. See 23 generally ECF No. 16. The instant Motion followed on September 26, 2018. See generally 24 ECF No. 17. 25 /// 26 /// 27 28 2 To date, StOps has not filed anything indicating that Ms. Erokhin or KBZ FX has been served. 3 17-CV-1539 JLS (WVG) Case 3:17-cv-01539-JLS-WVG Document 24 Filed 05/07/19 PageID.378 Page 4 of 12 1 LEGAL STANDARD 2 Federal Rule of Civil Procedure 12(b)(6) permits a party to raise by motion the 3 defense that the complaint “fail[s] to state a claim upon which relief can be granted,” 4 generally referred to as a motion to dismiss. The Court evaluates whether a complaint 5 states a cognizable legal theory and sufficient facts in light of Federal Rule of Civil 6 Procedure 8(a), which requires a “short and plain statement of the claim showing that the 7 pleader is entitled to relief.” 8 allegations,’ . . . it [does] demand more than an unadorned, the-defendant-unlawfully- 9 harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. 10 Corp. v. Twombly, 550 U.S. 544, 555 (2007)). In other words, “a plaintiff’s obligation to 11 provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and 12 conclusions, and a formulaic recitation of the elements of a cause of action will not do.” 13 Twombly, 550 U.S. at 555 (citing Papasan v. Allain, 478 U.S. 265, 286 (1986)). A 14 complaint will not suffice “if it tenders ‘naked assertion[s]’ devoid of ‘further factual 15 enhancement.’” Iqbal, 556 U.S. at 677 (citing Twombly, 550 U.S. at 557). Although Rule 8 “does not require ‘detailed factual 16 To survive a motion to dismiss, “a complaint must contain sufficient factual matter, 17 accepted as true, to ‘state a claim to relief that is plausible on its face.’” Id. (quoting 18 Twombly, 550 U.S. at 570); see also Fed. R. Civ. P. 12(b)(6). A claim is facially plausible 19 when the facts pled “allow the court to draw the reasonable inference that the defendant is 20 liable for the misconduct alleged.” Iqbal, 556 U.S. at 677 (citing Twombly, 550 U.S. at 21 556). That is not to say that the claim must be probable, but there must be “more than a 22 sheer possibility that a defendant has acted unlawfully.” Id. Facts “‘merely consistent 23 with’ a defendant’s liability” fall short of a plausible entitlement to relief. Id. (quoting 24 Twombly, 550 U.S. at 557). Further, the Court need not accept as true “legal conclusions” 25 contained in the complaint. Id. This review requires context-specific analysis involving 26 the Court’s “judicial experience and common sense.” Id. at 678 (citation omitted). 27 “[W]here the well-pleaded facts do not permit the court to infer more than the mere 28 /// 4 17-CV-1539 JLS (WVG) Case 3:17-cv-01539-JLS-WVG Document 24 Filed 05/07/19 PageID.379 Page 5 of 12 1 possibility of misconduct, the complaint has alleged—but it has not ‘show[n]’—‘that the 2 pleader is entitled to relief.’” Id. 3 In patent cases, purely procedural issues of law are governed by the law of the 4 regional circuit. K-Tech Telecomms., Inc. v. Time Warner Cable, Inc., 714 F.3d 1277, 1282 5 (Fed. Cir. 2013). “A motion to dismiss for failure to state a claim upon which relief can be 6 granted is a purely procedural questions not pertaining to patent law.” McZeal v. Sprint 7 Nextel Corp., 501 F.3d 1354, 1355–56 (Fed. Cir. 2007). In the Ninth Circuit, to be entitled 8 to the presumption of truth, a complaint’s allegations “must contain sufficient allegations 9 of underlying facts to give fair notice and to enable the opposing party to defend itself 10 effectively.” Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011), cert. denied 132 S. Ct. 11 2101 (2012). The Court will grant leave to amend unless it determines that no modified 12 contention “consistent with the challenged pleading . . . [will] cure the deficiency.” DeSoto 13 v. Yellow Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir. 1992) (quoting Schriber Distrib. 14 Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986)). 15 16 ANALYSIS I. Patent Infringement 17 StOps claims that the TTK infringes the Patents-in-Suit. See FAC ¶¶ 40–57. 18 Specifically, “[t]he TTK embodies and uses inventions claimed in the ’403 Patent and 19 meets each and every element of at least one claim of the ’403 Patent, either literally or 20 equivalently,” by, “[f]or example, . . . includ[ing] a raiment and vest for covering the torso 21 of a person” with “an outer surface with a color and a texture comparable to human skin” 22 and “[m]ounted on the outer surface . . . an orifice that is in fluid communication with a 23 fluid reservoir, thus allowing the person wearing the TTK to selectively expel a blood-like 24 fluid from the reservoir and through the orifice to simulate a bleeding wound or injury.” 25 Id. ¶ 41. “The vest includes an artificial rib cage that is positioned against the inner surface 26 of the raiment to simulate a skeletal structure and prosthetic internal human organs that are 27 removable from the TTK and replaceable with other prosthetic internal human organs.” Id. 28 The TTK also “embodies and uses inventions claimed in the ’693 Patent, and meets each 5 17-CV-1539 JLS (WVG) Case 3:17-cv-01539-JLS-WVG Document 24 Filed 05/07/19 PageID.380 Page 6 of 12 1 and every element of at least one claim of the ’693 Patent, either literally or equivalently,” 2 by “includ[ing] a raiment to cover a person’s torso and . . . covered with an outer surface 3 with at least one orifice through which blood-like fluid is dispensed from a fluid reservoir 4 to simulate a trauma event, and a vest underneath the raiment.” Id. ¶ 52. Finally, “[t]he 5 TTK embodies and uses inventions claimed in the ’774 Patent and meets each and every 6 element of at least one claim of the ’774 Patent, either literally of equivalently,” by 7 “includ[ing] a raiment to cover a person’s torso and . . . covered with an outer surface with 8 at least one orifice through which blood-like fluid is dispensed from a fluid reservoir to 9 simulate a trauma event, and a vest underneath the raiment and one or more wound 10 simulators on the outer surface.” Id. ¶ 54. StOps attaches several exhibits to the First 11 Amended Complaint purporting to depict the TTK, including a printout from KBZ FX’s 12 website, see FAC Ex. 4, and photos posted to KBZ FX, Inc.’s Picbear page, see FAC Ex. 13 5, and KBZ FX’s and/or Ms. Brea’s Instagram accounts. See FAC Exs. 6–9. 14 The Movants argue that the exhibits to the First Amended Complaint fail to provide 15 any factual basis for infringement of the Patents-in-Suit. See Mot. at 3–6. According to 16 the Movants, the photos establish that they have not made a product embodying the 17 inventions claimed in the Patents-in-Suit because none of the photos depicts a product 18 having a blood-like fluid reservoir or any cavity for containing artificial human organs as 19 required by the Patents-in-Suit. See id. StOps, on the other hand, argues that its exhibits 20 clearly depict that the Movants are manufacturing and selling a product that infringes the 21 Patents-in-Suit. See Opp’n at 4–11.3 22 An act of direct patent infringement occurs when an entity “without authority makes, 23 uses, offers to sell, or sells any patented invention, within the United States or imports into 24 the United States any patented invention during the term of the patent.” 35 U.S.C. § 271(a). 25 26 3 27 28 To the extent StOps relies on Instagram images and/or text not contained in the exhibits to its First Amended Complaint, see Opp’n at 7, the Court declines to consider them for purposes of this Motion. See ECF No. 15 at 5 (citing Lee v. City of L.A., 250 F.3d 668, 688 (9th Cir. 2001) (“As a general rule, ‘a district court may not consider any material beyond the pleadings in ruling on a Rule 12(b)(6) motion.’”)). 6 17-CV-1539 JLS (WVG) Case 3:17-cv-01539-JLS-WVG Document 24 Filed 05/07/19 PageID.381 Page 7 of 12 1 Here, StOps alleges that Defendants have made and sold a product, the TTK, that infringes 2 the Patents-in-Suit. See FAC ¶¶ 40–57. The Court previously determined that the print- 3 out from KBZ FX’s website, now Exhibit 4 to the First Amended Complaint, was not an 4 offer for sale. See ECF No. 15 at 6. StOps now attaches additional exhibits, however, 5 purporting to show that Defendants have made and rented and/or leased the TTK to 6 agencies for military training. See FAC Exs. 5–9; see also FAC ¶¶ 25–35. 7 The Court concludes that StOps has sufficiently alleged a cause of action for 8 infringement of the Patents-in-Suit. It is clear from the photos that the Defendants have 9 “ma[d]e” the TTK. StOps is correct that “[Section] 271 prohibits the making and using a 10 patent invention – even if not sold.” Opp’n at 4 n.1; see also Neff Instrument Corp. v. Cohu 11 Elecs., Inc., 269 F.2d 668, 673 (9th Cir. 1959) (“The mere manufacture of a patented 12 article, without sale, is sufficient to create an infringement.”) (citing Becton Dickinson & 13 Co. v. R. P. Scherer Corp., 211 F.2d 835, 842 (6th Cir. 1954); Carter Crume Co. v. Am. 14 Sales Book Co., 124 F. 903 (C.C.W.D.N.Y.), cert. denied, 190 U.S. 560 (1903)). 15 Further, the Court is not prepared to conclude at this stage, as the Movants urge, that 16 the TTK as depicted in Exhibits 4 through 9 to the First Amended Complaint does not have 17 a blood-like fluid reservoir or any cavity for containing artificial internal human organs, as 18 required by the Patents-in-Suit. See Mot. at 1–2, 4–6. For purposes of this Motion, the 19 Court must accept as true all of StOps’ well-pleaded allegations and draw all reasonable 20 inferences in its favor. See Daniels-Hall v. Nat’l Educ. Ass’n, 629 F.3d 992, 998 (9th Cir. 21 2010). Exhibit 4 clearly touts that the TTK’s “exit wound attachments come equipped with 22 bleeding capabilities.” FAC Ex. 4 at 58.4 The Court therefore may infer that the TTK has 23 a blood-like fluid reservoir. The website also advertises that the TTK is or may be equipped 24 with multiple “organs,” including a “simulated esophagus”; “3 liver attachments” and “3 25 stomach attachments,” both of which “simulate healthy, diseased, and shrapnel functions 26 27 28 4 Pin citations to pages without independent pagination refer to the CM/ECF page numbers electronically stamped at the top of each page. 7 17-CV-1539 JLS (WVG) Case 3:17-cv-01539-JLS-WVG Document 24 Filed 05/07/19 PageID.382 Page 8 of 12 1 [that] comes with bleed capabilities”; and an “intestinal tract [that] comes with attachment 2 piece to allow for pig intestines to be used for realistic eviscerated bowel simulation.” Id. 3 at 58–59. The Court therefore may also infer that the TTK has a cavity for containing 4 artificial human organs. Consequently, the Court concludes that StOps’ allegations are 5 sufficient to state a claim for infringement of the Patents-in-Suit and DENIES the 6 Movants’ Motion as to StOps’ first cause of action. 7 II. Breach of Nondisclosure Agreement 8 StOps alleges on information and belief that Mses. Joseph and Erokhin breached a 9 nondisclosure agreement signed at the outset of their employment with StOps by “us[ing] 10 StOps’ confidential and proprietary technology and trade secret information when 11 developing the TTK.” FAC ¶ 60. The Movants contend that this cause of action must be 12 dismissed “because StOps is required to specify the factual basis for its claims” and 13 therefore “may not plead such allegations based on information and belief.” Mot. at 6–7 14 (citing Vivendi SA v. T-Mobile USA Inc., 586 F.3d 689, 694 (9th Cir. 2009); Simonyan v. 15 Ally Fin. Inc., No. CV 12–8495–JFW (FMOx), 2013 WL 45453, at *2 (C.D. Cal. Jan. 3, 16 2013); Solis v. City of Fresno, No. 1:11-CV-00053 AWI GSA, 2012 WL 868681, at *8 17 (E.D. Cal. Mar. 13, 2012); United States v. Ctr. for Diagnostic Imaging, Inc., 787 F. Supp. 18 2d 1213, 1221 (W.D. Wash. 2011)). Plaintiff counters that “[a]ny allegations made on 19 information and belief is adequately supported by facts directly pleaded, including . . . the 20 existence of the nondisclosure agreement, the use of StOps’ confidential information by 21 Joseph and Erokhin, StOps’ lack of consent . . . , StOps’ compliance with its obligations 22 under the Non[ ]Disclosure agreement, etc.” Opp’n at 11 (citing FAC). These allegations 23 “provide more than a sufficient factual basis for the causes of action in the complaint.” Id. 24 at 12. 25 The Court agrees with the Movants that StOps has failed sufficiently to plead a cause 26 of action for breach of the nondisclosure agreement. StOps has failed to specify what 27 confidential information the Movants used in developing the TTK. It therefore appears 28 from the face of the First Amended Complaint that StOps is alleging that the Movants used 8 17-CV-1539 JLS (WVG) Case 3:17-cv-01539-JLS-WVG Document 24 Filed 05/07/19 PageID.383 Page 9 of 12 1 the “valuable knowledge and insight into the features and components of the Cut Suit and 2 how those components operate to simulate a traumatic injury or wound” in developing the 3 TTK. See FAC ¶ 22. The problem here is that the nondisclosure agreement excludes from 4 its definition of confidential information “information that is . . . publicly known at the 5 time of disclosure or subsequently becomes publicly known through no fault of the 6 Receiving Party.” See FAC Ex. 10 & 11 ¶ 2. The Patents-in-Suit are dated September 23, 7 2014, see FAC Ex. 1; May 10, 2016, see FAC Ex. 2; and March 13, 2018. See FAC Ex. 3. 8 Consequently, any information contained in the Patents-in-Suit is not confidential 9 information for purposes of the nondisclosure agreement. “Because Plaintiff fails to allege 10 that [the Movants] used any confidential information beyond what the . . . Patent[s-in-Suit] 11 . . . disclosed to the public, its claim for breach of [the nondisclosure agreement] fails.” 12 See Metricolor LLC v. L’Oreal S.A., No. CV 18-364-R, 2018 WL 5099496, at *5 (C.D. 13 Cal. Aug. 15, 2018). 14 The Court therefore GRANTS the Movants’ Motion as to StOps’ second cause of 15 action for breach of the nondisclosure agreement. Because StOps has not previously been 16 granted leave to amend this cause of action and because StOps could conceivably allege 17 that Defendants used confidential information as defined by the nondisclosure agreement 18 in creating the TTK, the Court GRANTS StOps leave to amend. 19 III. Violation of California Business and Professions Code § 17200 20 StOps claims that “Defendant[s’] unauthorized use and/or sale of a product that 21 embodies the inventions claimed in the ’403 Patent is unfair and offends public policy,” 22 FAC ¶ 68, and that Mses. “Joseph and Erokhin’s unauthorized use of StOps’ confidential 23 and proprietary technology and trade secret information to make a product that embodies 24 the inventions claimed in the ’403 Patent or otherwise cause harm to StOps for their own 25 benefit is unfair and offends public policy.” Id. ¶ 69. The Movants contend that this claim 26 must be dismissed because it is “founded on the same defective basis that fails to support 27 the infringement [and breach of the nondisclosure agreement] claims.” See Mot. at 6; see 28 also id. at 7–8. 9 17-CV-1539 JLS (WVG) Case 3:17-cv-01539-JLS-WVG Document 24 Filed 05/07/19 PageID.384 Page 10 of 12 1 It is true that “[a] UCL claim must be dismissed if the plaintiff has not stated a claim 2 for the predicate acts upon which he bases the claim.” Pellerin v. Honeywell Int’l, Inc., 3 877 F. Supp. 2d 983, 992 (S.D. Cal. 2012). Here, the Court determined that StOps has 4 failed to state a claim for breach of the nondisclosure agreement. Accordingly, the Court 5 GRANTS IN PART the Movants’ Motion and DISMISSES StOps’ third cause of action 6 for unfair competition in violation of the UCL to the extent that that cause of action is 7 predicated on Mses. Joseph and Erokhin’s alleged breach of the nondisclosure agreement. 8 Because the Court granted StOps leave to amend its second cause of action, it also 9 GRANTS StOps leave to amend its third cause of action. The Court also, however, 10 concluded that StOps had stated a claim for patent infringement. The Court therefore 11 DENIES the Movants’ Motion as to StOps’ third cause of action for unfair competition in 12 violation of the UCL to the extent that that cause of action is predicated on Defendants’ 13 infringement of the Patents-in-Suit.5 14 IV. Alter Ego Allegations 15 StOps alleges that, “[o]n information and belief, KBZ FX, Inc. was formed as a 16 direct result of the threat of this litigation, and is merely the alter-ego of Defendants 17 Erokhin and Joseph.” FAC ¶ 8. The Movants seek dismissal of these allegations because 18 they are not pled with particularity. See Mot. at 8. StOps counters that “[t]here is no 19 specific cause of action alleging Alter Ego, nor is there a specific prayer for relief 20 requesting a finding of Alter-Ego at this time.” Opp’n at 12. Accordingly, “StOps . . . will 21 seek to prove this fact through discovery and at trial.” Id. 22 /// 23 24 25 26 27 28 5 The Court notes that a UCL claim premised solely on infringement of a patent is generally preempted by the Patent Act. See, e.g., Deckers Outdoor Corp. v. Fortune Dynamic, Inc., No. CV 15-769 PSG (SSX), 2015 WL 12731929, at *8 (C.D. Cal. May 8, 2015) (“[T]he alleged unfair conduct is simply Defendants’ unauthorized manufacture, distribution, or sale of goods that infringe on Plaintiff’s patent. This theory of wrongful conduct is not ‘qualitatively different’ than a claim for patent infringement based on that conduct; therefore, the unfair competition claims premised on this theory are preempted by the Patent Act.”). Because Movants did not request dismissal of StOps’ third cause of action on this ground, the Court does not address the preemption issue here. 10 17-CV-1539 JLS (WVG) Case 3:17-cv-01539-JLS-WVG Document 24 Filed 05/07/19 PageID.385 Page 11 of 12 1 StOps is correct that the proper vehicle for the Movants’ challenge is not a motion 2 under Rule 12(b)(6); rather, the Movants’ request is more properly construed as a motion 3 to strike pursuant to Federal Rule of Civil Procedure 12(f). Pursuant to Rule 12(f), “[t]he 4 court may strike from a pleading an insufficient defense or any redundant, immaterial, 5 impertinent, or scandalous matter.” As indicated in the Court’s prior Order, see ECF No. 6 15 at 7, “[c]onclusory allegations of ‘alter ego’ status are insufficient to state a claim.” 7 Neilson v. Union Bank of Cal., N.A., 290 F. Supp. 2d 1101, 1116 (C.D. Cal. 2003). “Rather, 8 a plaintiff must allege specifically both the elements of alter ego liability, as well as facts 9 supporting each.” Id. These elements are: “(1) such a unity of interest and ownership 10 exists that the personalities of the corporation and individual are no longer separate, and 11 (2) an inequitable result will follow if the acts are treated as those of the corporation alone.” 12 RRX Indus., Inc. v. Lab-Con, Inc., 772 F.2d 543, 545–46 (9th Cir. 1985). In analyzing the 13 doctrine, courts consider factors such as: 14 commingling of funds and other assets of the two entities, the holding out by one entity that it is liable for the debts of the other, identical equitable ownership in the two entities, use of the same offices and employees, and use of one as a mere shell or conduit for the affairs of the other. 15 16 17 18 Sonora Diamond Corp. v. Super. Ct., 83 Cal. App. 4th 523, 538–39 (2000) (internal 19 quotation marks omitted). 20 As before, the Court concludes that StOps’ alter-ego allegations are conclusory and 21 therefore are insufficient to plead alter ego liability. 22 paragraph[ 8] cannot establish alter ego liability and therefore have no bearing on any issue 23 involved in this litigation[,] . . . [t]he Court GRANTS [the Movants’] motion” and 24 STRIKES the alter-ego allegations in paragraph 8 of the First Amended Complaint. See 25 Lovesy v. Armed Forces Ben. Ass’n, No. C 07-2745 SBA, 2008 WL 696991, at *5 (N.D. 26 Cal. Mar. 13, 2008) (citing Fed. R. Civ. P. 12(f); Colaprico v. Sun Microsys., Inc., 758 F. 27 Supp. 1335, 1339 (N.D. Cal. 1991)) (emphasis added). 28 /// Because “the allegations in 11 17-CV-1539 JLS (WVG) Case 3:17-cv-01539-JLS-WVG Document 24 Filed 05/07/19 PageID.386 Page 12 of 12 1 CONCLUSION 2 For the foregoing reasons, the Court GRANTS IN PART AND DENIES IN PART 3 the Movants’ Motion to Dismiss. Specifically, the Court DISMISSES WITHOUT 4 PREJUDICE StOps’ second cause of action for breach of the nondisclosure agreement 5 and third cause of action for unfair competition in violation of California Business and 6 Professions Code section 17200 to the extent it is predicated on Ms. Joseph’s breach of the 7 nondisclosure agreement. The Court also STRIKES StOps’ alter-ego allegations from 8 paragraph 8 of the First Amended Complaint. 9 DENIED. StOps MAY FILE a second amended complaint on or before twenty-one (21) 10 days of the electronic docketing of this Order. Should StOps choose not to file an amended 11 complaint, this case will proceed on the remaining allegations. The Movants’ Motion is otherwise 12 Because StOps has not filed any document with the Court indicating that it has 13 served Defendants Kasey Erokhin or KBZ FX, StOps SHALL FILE proof of service 14 against Ms. Erokhin and KBZ FX on or before twenty-one (21) days of the electronic 15 docketing of this Order. Failure to do so may result in dismissal without prejudice of 16 StOps’ causes of action against Ms. Erokhin and KBZ FX pursuant to Federal Rule of Civil 17 Procedure 4(m). 18 IT IS SO ORDERED. 19 20 Dated: May 7, 2019 21 22 23 24 25 26 27 28 12 17-CV-1539 JLS (WVG)

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