Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_13-cv-01770/USCOURTS-caed-2_13-cv-01770-2/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Other Contract

---

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

1 

UNITED STATES DISTRICT COURT 

EASTERN DISTRICT OF CALIFORNIA 

U.S. LEGAL SUPPORT, INC., 

A Texas corporation, 

Plaintiff, 

v. 

AMEEN HOFIONI, an individual,

MORGAN ALBANESE, an 

individual, THE LIT GROUP, 

a Nevada corporation, 

HUTCHINGS COURT REPORTERS, 

LLC, a California 

corporation, LITIGATION 

SERVICES, a Nevada 

corporation, 

Defendants. 

No. CIV. S-13-01770 LKK/AC 

ORDER 

This matter concerns a trade secrets dispute between 

Plaintiff U.S. Legal Support, Inc. and Defendants Ameen Hofioni, 

Morgan Albanese, The LIT Group, Hutchings Court Reporters, LLC, 

and Litigation Services. Plaintiff alleges that Hofioni and 

Albanese, its former employees, misappropriated certain trade 

secrets and other confidential information, and are using this 

information for the benefit of their new employer, The LIT Group, 

Case 2:13-cv-01770-MCE-AC Document 38 Filed 12/20/13 Page 1 of 34
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

2 

and its affiliated entities, Hutchings and Litigation Services,1

and to Plaintiff’s consequent detriment. 

The operative complaint alleges eight causes of action under 

California law. Defendants now move to dismiss under Fed. R. Civ. 

P. 12(b)(6). 

Defendants’ motion came on for hearing on November 18, 2013. 

For the reasons set forth below, their motion will be granted in 

part and denied in part. 

 I. BACKGROUND 

A. Factual Background 

Plaintiff is one of the country’s largest providers of court 

reporting, record retrieval, and other legal support services. 

(Complaint ¶ 17.) The firm has 40 offices throughout the United 

States, including offices in San Francisco, Sacramento, and 

Fresno (collectively, its Northern California region). (Id. 

¶¶ 17, 18, 43.) 

Plaintiff “aggregat[es] and creat[es] detailed non-public 

data derived from [its] business relationships with its potential 

and current customers[.]” (Id. ¶ 24.) It uses this data to: 

(a) Identify those persons within customer 

organizations responsible for procuring and 

ordering U.S. Legal Support’s services, 

including secretaries, paralegals, and at 

times associate attorneys, whose identities 

are not readily discernible from public 

information; 

(b) Track and anticipate customer needs for 

U.S. Legal Support’s services based on non-

 

1 The LIT Group, Hutchings Court Reporters, LLC, and Litigation 

Services are collectively referred to herein as the “Entity 

Defendants.” 

Case 2:13-cv-01770-MCE-AC Document 38 Filed 12/20/13 Page 2 of 34
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

3 

public information concerning (i) the 

customer’s historical usage of U.S. Legal 

Support’s services; and (ii) customers’ 

upcoming projects; 

(c) Track U.S. Legal Support revenue by 

customer, including trends in the usage of 

U.S. Legal Support’s services, which data 

includes detailed metrics such as (i) the 

customer; (ii) the customer contact within 

the organization that ordered the work; (iii) 

date of service/projected date of service; 

(iv) amount paid for service; (v) the revenue 

generated on a per job basis; (vi) the 

monthly revenue generated by customer for the 

month; and (vii) dollar and percentage 

changes in historical to present use of U.S. 

Legal Support’s services; and 

(d) Identify each U.S. sales representative 

and track his or her productivity as measured 

by depositions and records ordered. This 

data is tracked by week, month, and year. 

(Complaint ¶ 24.) 

The Complaint terms items (a) – (d) “Confidential Information.” 

Plaintiff avers that it has spent years and millions of 

dollars obtaining, analyzing, and maintaining the confidentiality 

of, this information; that it is of great value to the company; 

and that its possession would give any competitor an unfair 

competitive advantage. (Id. ¶¶ 26, 27, 30-32.) Plaintiff protects 

its Confidential Information by restricting access to, and 

password-protecting, its computers and documents, and by 

requiring employees to sign non-disclosure agreements and comply 

with confidentiality policies. (Id. ¶¶ 33, 34.) 

Plaintiff also identifies specific Microsoft Excel and PDF 

files which contain non-public data about Plaintiff’s customers 

and sales representatives as its “confidential, proprietary, and 

Case 2:13-cv-01770-MCE-AC Document 38 Filed 12/20/13 Page 3 of 34
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

4 

trade secret information.”2 (Id. ¶¶ 59, 60.) These files include: 

(a) An Excel file, entitled “CR – Reporting Sales – TTM 

2.2013 – Ameen Hofioni.xlsx,” which identifies every 

law firm and every employee at each law firm that 

ordered Plaintiff’s services in Defendant Hofioni’s 

territory, as well as sales and revenue trends for each 

of these customers. (Id. ¶ 60.) 

(b) Another Excel file, “AMEEN Top 25 – December 

2012.xlsx,” identifies those customers in Hofioni’s 

territory whose purchases of Plaintiff’s services 

increased and decreased the most in 2012. (Id.) 

(c) A PDF file, entitled “R_PA_SC00.pdf,” also known as 

a “Sales Commission Report,” identifies “monthly U.S. 

Legal Support revenue by firm, who within the firm 

purchased U.S. Legal Support’s products and services, 

and the lawsuit for which the services were purchased.” 

(Id.) 

(d) A second PDF file, entitled “R_PA_SC00.pdf,” also 

known as a “Calendar Analysis Report” or “Depos That 

Went Forward Report,” identifies customers in the 

Northern California region who are actively setting 

depositions. (Id.) 

 

2 The Complaint uses this phrase repeatedly to characterize the 

information at issue. The legal significance of this phrase for 

Plaintiff’s claims is addressed below.

Case 2:13-cv-01770-MCE-AC Document 38 Filed 12/20/13 Page 4 of 34
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

5 

(e) A third Excel file, “RR Incoming Orders by Sales 

Rep – 4.22 – 4.28.2013.xlsx” identifies Plaintiff’s 

sales representatives nationally and the volume of 

orders he or she produced. (Id.) 

The Complaint terms items (a) – (e) “Confidential Documents.”3

 Defendant Hofioni worked for Plaintiff from June 1, 2009 

until July 18, 2013. At the time of his departure, he was 

Director of Business Development, responsible for the Northern 

California region. (Id. ¶¶ 11, 43.) Defendant Albanese worked for 

Plaintiff from August 20, 2012 to July 19, 2013; Hofioni was her 

supervisor; when she departed, she was a Sales Assistant. (Id. 

¶ 12.) Both employees had access to Plaintiff’s Confidential 

Information. (Id. ¶ 46.) 

Plaintiff’s January 2013 employee handbook provides that 

“[t]he protection of confidential business information and trade 

secrets is vital to the interests of U.S. Legal Support, Inc.[,]” 

and defines “confidential information” as including customer 

lists, customer preferences, financial information, personnel 

information, and trade secrets. (Id. ¶ 41.) Hofioni and Albanese 

both signed forms acknowledging receipt of the handbook. (Id. 

¶ 38.) Hofioni and Albanese variously signed other confidential 

information agreements and non-disclosure agreements. (Id. ¶¶ 38-

41.) 

 

3 Plaintiff’s use of the defined terms “Confidential Information” 

and “Confidential Documents” to refer to trade secret 

information, and “confidential information” to refer to non-trade 

secret information engenders some confusion. Plaintiff may wish 

to use more distinct terms in any amended complaint. 

Case 2:13-cv-01770-MCE-AC Document 38 Filed 12/20/13 Page 5 of 34
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

6 

The Complaint alleges the following actions by Hofioni and 

Albansese: 

 On October 2, 2012, Hofioni reported that his laptop 

computer was stolen; he was subsequently issued a 

replacement laptop. (Id. ¶ 72.) Hofioni returned a 

single laptop to Plaintiff upon his resignation; this 

laptop appears not to have been used after October 2, 

2012, though Hofioni claims to have used a laptop after 

this date. (Id. ¶ 73.) Plaintiff alleges, on 

information and belief, that Hofioni kept the second 

laptop that he was issued. (Id. ¶ 74.) 

 Between April and July 2013, Hofioni and Albanese 

“covertly accessed and retained” the Confidential 

Documents listed above. (Id. ¶ 60.) 

 Between April and July 2013, Hofioni sent 25 email 

messages from his work email address to his personal 

email address, many with attachments containing 

Plaintiff’s “confidential, proprietary, and trade 

secret information.” (Id. ¶ 57.) 

 On two days in April 2013, Hofioni sent 20 email 

messages from his work email address to Albanese’s 

personal email address, all with attachments containing 

Plaintiff’s “confidential, proprietary, and trade 

secret information.” (Id. ¶ 58.) 

 On April 22, 2013, Hofioni was subject to a “corrective 

action” due to inappropriate behavior towards a coworker. (Id. ¶ 47.) That same day, he requested 

Plaintiff’s rates for the cities and regions in 

Case 2:13-cv-01770-MCE-AC Document 38 Filed 12/20/13 Page 6 of 34
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

7 

California. (Id. ¶ 61.) There was no legitimate 

business purpose for this request. (Id. ¶ 62.) 

 In April 2013, Hofioni also requested a list of all 

court reporters used by Plaintiff’s San Francisco 

office. (Id. ¶ 63.) There was no legitimate business 

purpose for this request. (Id.) 

 On information and belief, Hofioni logged into a fellow 

employee’s account and recorded all of her customer 

contact information, retaining it after his 

resignation. Plaintiff believes that Hofioni is using 

this data to unfairly compete with it. (Id. ¶ 83.) 

Plaintiff contends that these actions violated its 

confidentiality policies and the agreements signed by Hofioni and 

Albanese. (Id. ¶ 77.) 

On July 19, 2013, Plaintiff discovered that Hofioni would be 

joining The LIT Group and its related entities as the Regional 

President for Northern California Sales, while Albanese would be 

joining as the Client Services Manager. (Id. ¶ 68.) According to 

Plaintiff, the Entity Defendants are its direct competitors, and 

“did not have a presence in Northern California prior to the 

individual defendants misappropriating [Plaintiff’s] information 

and beginning work for [the Entity Defendants].” (Id. ¶ 3, 68.) 

Plaintiff alleges that Hofioni and Albanese, acting on 

behalf of the Entity Defendants, have solicited Plaintiff’s 

employees and customers, and interfered with Plaintiff’s business 

relationships with its customers. (Id. ¶¶ 78, 80, 82-85, 93.) 

Plaintiff also alleges that Hofioni has sent its customers 

marketing materials from the Entity Defendants which “incorporate 

Case 2:13-cv-01770-MCE-AC Document 38 Filed 12/20/13 Page 7 of 34
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

8 

information that is nearly identical to that of U.S. Legal 

Support’s business plans and related marketing materials.” 

(Id. ¶ 142.) 

Finally, Plaintiff alleges that Hofioni fraudulently 

obtained thousands of dollars from it, specifically by: 

 Using his corporate credit card to charge items and 

send gifts to Plaintiff’s customers in the period 

leading up to his resignation, in order to engender 

goodwill when he joined the Entity Defendants. (Id. 

¶¶ 89, 92.) For example, two weeks before he resigned, 

he sent chocolate-covered strawberries to Plaintiff’s 

customers, accompanied by a note providing, “Thanks so 

much for always allowing me to be your Court Reporting 

guy! I have always valued the relationship and would 

like nothing more than to continue to serve your Firm.” 

(Id. ¶ 90.) 

On information and belief, submitting expense reports for 

gift card purchases that he kept for his own benefit. For 

example, in early May, Hofioni spent over $2000 on gift cards at 

a Safeway store; Plaintiff is informed and believes that he did 

not distribute these to the customers that he listed on his 

expense reports, but instead kept some or all of the cards for 

himself. (Id. ¶ 91.) 

B. Procedural Background 

Plaintiff commenced this action on August 26, 2013. Four 

days later, Plaintiff filed a motion for a temporary restraining 

order, an order to show cause regarding issuance of a preliminary 

Case 2:13-cv-01770-MCE-AC Document 38 Filed 12/20/13 Page 8 of 34
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

9 

injunction, an order to preserve evidence, and an order for 

expedited discovery. (ECF No. 5.) Ultimately, these motions were 

resolved through a stipulated preliminary injunction and order 

for expedited discovery, entered by the court on September 24, 

2013. (ECF No. 24) 

The operative complaint pleads eight causes of action: 

(i) misappropriation of trade secrets under California’s 

codification of the Uniform Trade Secrets Act, Cal. Civ. Code 

§§ 3426-3426.11; (ii) breach of contract; (iii) breach of the 

duty of loyalty; (iv) breach of the duty of confidence; 

(v) statutory unfair competition, under Cal. Bus. & Prof. Code 

§ 17200; (vi) conversion; (vii) fraud; and (viii) conspiracy. The 

second, third, fourth, and seventh causes of action are alleged 

solely against Hofioni and Albanese; the rest are alleged against 

all Defendants. Each cause of action is pled under California 

state law. (ECF No. 1.) Plaintiff seeks, inter alia, injunctive 

relief, compensatory and punitive damages, disgorgement, and the 

imposition of a constructive trust. 

Defendants now move to dismiss a number of Plaintiff’s 

claims. 

II. STANDARD 

A dismissal motion under Federal Rule of Civil 

Procedure 12(b)(6) challenges a complaint’s compliance with the 

federal pleading requirements. Under Rule 8(a)(2), a pleading 

must contain a “short and plain statement of the claim showing 

that the pleader is entitled to relief.” The complaint must give 

the defendant “‘fair notice of what the . . . claim is and the 

Case 2:13-cv-01770-MCE-AC Document 38 Filed 12/20/13 Page 9 of 34
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

10 

grounds upon which it rests.’” Bell Atlantic v. Twombly, 550 U.S. 

544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 

(1957)). 

To meet this requirement, the complaint must be supported by 

factual allegations. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). 

Moreover, this court “must accept as true all of the factual 

allegations contained in the complaint.” Erickson v. Pardus, 551 

U.S. 89, 94 (2007).4

“While legal conclusions can provide the framework of a 

complaint,” neither legal conclusions nor conclusory statements 

are themselves sufficient, and such statements are not entitled 

to a presumption of truth. Iqbal, 556 U.S. at 679. Iqbal and 

Twombly therefore prescribe a two-step process for evaluation of 

motions to dismiss. The court first identifies the non-conclusory 

factual allegations, and then determines whether these 

allegations, taken as true and construed in the light most 

favorable to the plaintiff, “plausibly give rise to an 

entitlement to relief.” Iqbal, 556 U.S. at 679. 

“Plausibility,” as it is used in Twombly and Iqbal, does not 

refer to the likelihood that a pleader will succeed in proving 

the allegations. Instead, it refers to whether the non-conclusory 

factual allegations, when assumed to be true, “allow[] the court 

to draw the reasonable inference that the defendant is liable for 

 4 Citing Twombly, 550 U.S. at 555-56, Neitzke v. Williams, 

490 U.S. 319, 327 (1989) (“What Rule 12(b)(6) does not 

countenance are dismissals based on a judge’s disbelief of a 

complaint’s factual allegations”), and Scheuer v. Rhodes, 416 

U.S. 232, 236 (1974) (“[I]t may appear on the face of the 

pleadings that a recovery is very remote and unlikely but that is 

not the test” under Rule 12(b)(6)).

Case 2:13-cv-01770-MCE-AC Document 38 Filed 12/20/13 Page 10 of 34
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

11 

the misconduct alleged.” Iqbal, 556 U.S. at 678. “The 

plausibility standard is not akin to a ‘probability requirement,’ 

but it asks for more than a sheer possibility that a defendant 

has acted unlawfully.” Id. (quoting Twombly, 550 U.S. at 557).5 A 

complaint may fail to show a right to relief either by lacking a 

cognizable legal theory or by lacking sufficient facts alleged 

under a cognizable legal theory. Balistreri v. Pacifica Police 

Dep't, 901 F.2d 696, 699 (9th Cir. 1990). 

III. ANALYSIS 

When the court sits in diversity, it must ordinarily apply 

the substantive law of the forum in which it is located. Erie 

R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938). California 

substantive law therefore governs. 

A. What trade secrets are at issue? 

Defendants do not move to dismiss Plaintiff’s first cause of 

action, for misappropriation of trade secrets, as pled against 

 5 Twombly imposed an apparently new “plausibility” gloss on 

the previously well-known Rule 8(a) standard, and retired the 

long-established “no set of facts” standard of Conley v. Gibson, 

355 U.S. 41 (1957), although it did not overrule that case 

outright. See Moss v. U.S. Secret Service, 572 F.3d 962, 968 (9th 

Cir. 2009) (the Twombly Court “cautioned that it was not outright 

overruling Conley[,]” although it was retiring the “no set of 

facts” language from Conley). The Ninth Circuit has acknowledged 

the difficulty of applying the resulting standard, given the 

“perplexing” mix of standards the Supreme Court has applied in 

recent cases. See Starr v. Baca, 652 F.3d 1202, 1215 (9th Cir. 

2011) (comparing the Court’s application of the “original, more 

lenient version of Rule 8(a)” in Swierkiewicz v. Sorema N.A., 534 

U.S. 506 (2002) and Erickson v. Pardus, 551 U.S. 89 (2007) (per 

curiam), with the seemingly “higher pleading standard” in Dura 

Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336 (2005), Twombly and 

Iqbal), cert. denied, 132 S. Ct. 2101 (2012). See also Cook v. 

Brewer, 637 F.3d 1002, 1004 (9th Cir. 2011) (applying the “no set 

of facts” standard to a Section 1983 case).

Case 2:13-cv-01770-MCE-AC Document 38 Filed 12/20/13 Page 11 of 34
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

12 

Hofioni and Albanese. In fact, Defendants acknowledge in their 

Reply that the Complaint adequately pleads the trade secret 

status of the Confidential Information. (Reply 1.) The court will 

therefore treat the trade secret status of the Confidential 

Information as adequately-pled. 

What is less certain is the trade secret status of the 

information in the Confidential Documents, which Plaintiff 

characterizes as containing “confidential, proprietary, and trade 

secret information.” (Id. ¶ 59.) The court will infer, based on 

the overlap between the content of the Excel and PDF files 

described in the Complaint, and the description of the 

Confidential Information, that the Confidential Documents contain 

trade secret information. 

B. Has Plaintiff stated a claim against the Entity 

Defendants? 

Plaintiff’s causes of action for misappropriation of trade 

secrets, statutory unfair competition, conversion, and conspiracy 

are pled against Hofioni, Albanese, and the Entity Defendants. 

The latter move to dismiss on the grounds that the Complaint 

fails to state any claim against them whatsoever. Their attack is 

two-pronged: they contend both that Plaintiff has failed to 

allege sufficient facts to find them directly liable for 

Hofioni’s and Albanese’s actions, or to impute liability to them. 

(Motion 11, 14.) 

As discussed elsewhere in this order, (i) Plaintiff has 

adequately pled causes of action for statutory unfair competition 

and conversion against the Entity Defendants, and (ii) California 

law does not recognize a standalone cause of action for 

Case 2:13-cv-01770-MCE-AC Document 38 Filed 12/20/13 Page 12 of 34
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

13 

conspiracy. Accordingly, the court here only considers the Entity 

Defendants’ argument that the complaint fails to state a cause of 

action against them for trade secrets misappropriation. 

Plaintiff does not argue that it alleged the Entity 

Defendants’ direct liability. Instead, Plaintiff responds that 

the Complaint satisfactorily alleges the Entity Defendants’ 

vicarious liability on both respondeat superior and conspiracy 

grounds. (Opposition 8.) 

1. Has Plaintiff adequately pled the Entity 

Defendants’ liability under a respondeat 

superior theory? 

According to Witkin, “Under the doctrine of respondeat 

superior, the innocent principal or employer is liable for the 

torts of the agent or employee, committed while acting within the 

scope of employment.” 3 Witkin, Summary of Cal. Law: Agency (10th 

ed. 2005) § 165, p. 208. The doctrine is founded in both common 

law, as well as on Cal. Civ. Code § 2338, which provides: “[A] 

principal is responsible to third persons for the negligence of 

his agent in the transaction of the business of the agency, 

including wrongful acts committed by such agent in and as a part 

of the transaction of such business, and for his willful omission 

to fulfill the obligations of the principal.” 

In support of its positions, Plaintiff cites Language Line 

Servs., Inc. v. Language Servs. Assocs., LLC, NO. C 10-02605 JW, 

2010 WL 2764714, 2010 U.S. Dist. LEXIS 140350 (N.D. Cal. Jul. 13, 

2010) (Ware, J.) (granting preliminary injunction in trade 

secrets dispute). Language Line, in turn, relies on a California 

appellate decision, Yamaguchi v. Harnsmut, which held that an 

Case 2:13-cv-01770-MCE-AC Document 38 Filed 12/20/13 Page 13 of 34
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

14 

“employer may[] be vicariously liable for the employee’s tort — 

even if it was malicious, willful, or criminal — if the 

employee’s act was an outgrowth of his employment, inherent in 

the working environment, typical of or broadly incidental to the 

employer’s business, or, in a general way, foreseeable from his 

duties.” 106 Cal. App. 4th 472, 482 (2003) (internal quotations 

omitted). In Language Line, the district court – faced with a 

factual situation similar to the one presented by the instant 

case – indicated its willingness to premise employer liability on 

a respondeat superior theory. 

The Entity Defendants nevertheless argue that the Complaint 

lacks allegations sufficient to support a respondeat superior

theory, and accordingly, the claims against them must be 

dismissed. (Reply 6.) 

Plaintiff contends that the following two paragraphs in the 

Complaint support its respondeat superior theory: 

14. U.S. Legal Support is informed and 

believes, and based upon such information and 

belief alleges, that at all times relevant to 

this action, each of the Defendants named 

herein was doing business as (“dba”) and/or 

was the agent, principal, servant, 

representative, employer, employee, jointventurer, partner (of any kind), parent, 

subsidiary, affiliate, and/or alter ego of 

each and every other Defendant and, in doing 

the things hereinafter alleged, was acting 

within the course and/or scope of such 

authority as the dba, agent, principal, 

servant, representative, employer, employee, 

joint-venturer, partner (of any kind), 

parent, subsidiary, affiliate, and/or alter 

ego with the permission and consent of the 

remaining Defendants. 

Case 2:13-cv-01770-MCE-AC Document 38 Filed 12/20/13 Page 14 of 34
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

15 

104. U.S. Legal Support is informed and 

believes, and based thereon alleges, that 

Hofioni and Albanese agreed among themselves, 

and with representatives of The LIT Group and 

its related entities, prior to Hofioni and 

Albanese commencing their employment with The 

LIT Group and its related entities and 

thereafter, to misappropriate U.S. Legal 

Support’s trade secret information and then 

utilize said information to compete against 

and injure U.S. Legal Support. (Opposition 

8.) 

It is difficult to disagree with the Entity Defendants’ 

characterization of the first paragraph as consisting largely of 

the type of conclusory allegations warned against by Twombly and 

Iqbal. (Reply 5.) The second paragraph, by contrast, contains 

sufficient factual content to pass Twombly/Iqbal muster, 

particularly when considered with other allegations in the 

Complaint that describe the nature of the misappropriation and 

the trade secrets at issue. 

Nevertheless, this paragraph takes the Complaint beyond the 

ambit of respondeat superior, a doctrine which is used to impose 

vicarious liability on employers for the torts of their 

employees.6 The paragraph quoted above alleges the Entity 

 

6

 See, e.g., Yamaguchi, 106 Cal. App. 4th at 481 (“Under the 

doctrine of respondeat superior, an innocent employer may be 

liable for the torts its employee commits while acting within the 

scope of his employment.”); Hinman v. Westinghouse Elec. Co., 2 

Cal. 3d 956, 959-960 (1970) (“The losses caused by the torts of 

employees, which as a practical matter are sure to occur in the 

conduct of the employer’s enterprise, are placed upon that 

enterprise itself, as a cost of doing business.”); Farms Ins. 

Grp. v. Cnty. of Santa Clara, 11 Cal. 4th 992, 1004 (1995) 

(“‘[F]oreseeability’ as a test for respondeat superior merely 

means that in the context of the particular enterprise an 

employee’s conduct is not so unusual or startling that it would 

seem unfair to include the loss resulting from it among other 

costs of the employer’s business.”) (internal quotation omitted). 

Case 2:13-cv-01770-MCE-AC Document 38 Filed 12/20/13 Page 15 of 34
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

16 

Defendants’ knowing participation in a scheme to misappropriate 

trade secrets. This is in marked contrast to the situation 

presented in Language Line, supra, where the new employer 

contended that it could not be held liable because its “executive 

and management team did not know of the misappropriation.” 2010 

WL 2764714 at *2, 2010 U.S. Dist. LEXIS 140350 at *6-7. The 

district court was nevertheless willing to impose vicarious 

liability under respondeat superior principles because “an act of 

this nature [i.e., using trade secrets] was generally foreseeable 

as part of the [individuals defendants’] duties to solicit 

customers for [the new employer].” Id., 2010 WL 2764714 at *5, 

2010 U.S. Dist. LEXIS 140350 at *12 (citing Yamaguchi, 106 Cal. 

App. 4th at 481-82). 

Plaintiff may be able to assert the Entity Defendants’ 

direct liability based on the allegations in Paragraph 104.7 But 

as currently pled, the Complaint does not include relevant 

allegations that might support a respondeat superior theory: that 

Hofioni and Albanese were acting within the scope of their 

employment or agency, and that their misappropriation and use of 

Plaintiff’s trade secrets were either “required by or incident to 

[their] duties, or could reasonably be foreseen by the employer 

in any event.” John R. v. Oakland Sch. Dist., 48 Cal. 3d 438, 463 

(1989). Plaintiff’s respondeat superior argument is therefore 

unavailing.8

 

7 Plaintiff would need to include additional allegations in 

support of a claim for corporate liability for trade secrets 

misappropriation. 

8 One could advance a sensible argument that, in any instance in 

which an employee is alleged to have misappropriated trade 

Case 2:13-cv-01770-MCE-AC Document 38 Filed 12/20/13 Page 16 of 34
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

17 

2. Has Plaintiff adequately pled the Entity 

Defendants’ liability as part of a 

conspiracy? 

The elements of a conspiracy are (1) formation and operation 

of a conspiracy; (2) wrongful acts done in furtherance of the 

agreed-to plan; and (3) resulting damages. Applied Equip. Corp. 

v. Litton Saudi Arabia Ltd., 7 Cal. 4th 503, 511 (1994). 

Plaintiff has alleged the formation and operation of a 

conspiracy. Paragraph 104 of the Complaint, reproduced above, 

alleges that Hofioni and Albanese, prior to commencing their 

employment with the Entity Defendants, agreed with the Entity 

Defendants to misappropriate Plaintiff’s trade secrets. This 

allegation satisfies the first element. But this paragraph is 

pled only in relation to the trade secrets misappropriation cause 

of action. 

The second element is satisfied, as the Complaint sets forth 

various wrongful acts in furtherance of the conspiracy, e.g., 

that between April and July 2013, Hofioni and Albanese “covertly 

 

secrets and departed for a similar position with a competitor, it 

is reasonably foreseeable that the employee would then use the 

trade secrets for the new employer’s benefit. But California law 

does not currently recognize that respondeat superior liability 

is potentially inherent in this factual situation. Accordingly, 

it seems appropriate that Plaintiff be required to explicitly 

plead the supporting allegations. The court, in reaching this 

conclusion, is also guided by decisions holding that California 

law does not recognize the inevitable disclosure doctrine, 

whereby “a plaintiff may prove a claim of trade secret 

misappropriation by demonstrating the defendant’s new employment 

will inevitably lead him to rely on the plaintiff’s trade 

secrets.” Whyte v. Schlage Lock Co., 101 Cal. App. 4th 1443, 1458 

(2002) (quoting PepsiCo, Inc. v. Redmond, 54 F.3d 1262, 1269 (7th 

Cir. 1995)). See also FLIR Systems, Inc. v. Parrish, 174 Cal. 

App. 4th 1270, 1277 (2009) (“The doctrine of inevitable 

disclosure is not the law in California”). 

Case 2:13-cv-01770-MCE-AC Document 38 Filed 12/20/13 Page 17 of 34
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

18 

accessed and retained” the Confidential Documents. (Complaint 

¶ 60.) 

Finally, Plaintiff adequately pleads damages. The Complaint 

provides that Hofioni and Albanese “are actively soliciting 

through use of U.S. Legal Support’s trade secrets U.S. Legal 

Support’s customers for business on behalf of the LIT Group and 

its related entities.” (Complaint ¶ 93.) The Complaint also 

provides the specific example of Hofioni “repeatedly . . . 

contact[ing] the customers served by U.S. Legal Account 

Executive[] Jenna Derdowski during the period Hofioni and 

Albanese were employed by U.S. Legal Support.” (Id. ¶ 83.) And 

Plaintiff alleges that “Defendants have already caused U.S. Legal 

Support monetary damage.” (Id. ¶ 100.) 

The court takes note that, under California law, conspiracy 

is not a stand-alone cause of action, but rather, “a legal 

doctrine that imposes liability on persons who, although not 

actually committing a tort themselves, share with the immediate 

tortfeasors a common plan or design in its perpetration.” Applied 

Equip. Corp., 7 Cal. 4th at 510–511 (citing Wyatt v. Union Mortg. 

Co., 24 Cal.3d 773, 784 (1979)). “Standing alone, a conspiracy 

does no harm and engenders no tort liability. It must be 

activated by the commission of an actual tort.” Id. at 511. 

Accordingly, Plaintiff must specify which torts were the objects 

of the conspiracy. The court infers that Plaintiff intended to 

plead a conspiracy to commit trade secrets misappropriation, as 

Paragraph 104 is pled as part of that cause of action. 

Nevertheless, the Complaint fails to set forth a basis for 

respondeat superior liability on the misappropriation claim. 

Case 2:13-cv-01770-MCE-AC Document 38 Filed 12/20/13 Page 18 of 34
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

19 

C. Are Plaintiff’s third through sixth claims preempted 

by CUTSA? 

Defendants contend that Plaintiff’s claims for breach of the 

duty of loyalty (alleged against Hofioni and Albanese), breach of 

the duty of confidence (alleged against Hofioni and Albanese), 

statutory unfair competition (alleged against all Defendants), 

and conversion (alleged against all Defendants) must be dismissed 

because California’s codification of the Uniform Trade Secrets 

Act (“CUTSA”), Cal. Civ. Code § 3426 et seq.,9

 supersedes claims 

“based on the same nucleus of facts as [a] misappropriation of 

trade secrets claim for relief.” K.C. Multimedia, Inc. v. Bank of 

America Tech. & Operations, Inc., 171 Cal. App. 4th 939, 958 

(2009) (internal citation and quotation omitted). (Motion 5.) 

The California Supreme Court has yet to rule on CUTSA’s 

supersessive scope. In such circumstances, courts in the Ninth 

Circuit are directed to proceed as follows: 

When interpreting state law, federal courts 

are bound by decisions of the state’s highest 

court. In the absence of such a decision, a 

federal court must predict how the highest 

state court would decide the issue using 

intermediate appellate court decisions, 

decisions from other jurisdictions, statutes, 

 

9 “[T]the eleven provisions of the [C]UTSA set forth: the 

definition of ‘misappropriation’ and ‘trade secret,’ injunctive 

relief for actual or threatened misappropriation, damages, 

attorney fees, methods for preserving the secrecy of trade 

secrets, the limitations period, the effect of the title on other 

statutes or remedies, statutory construction, severability, the 

application of title to acts occurring prior to the statutory 

date, and the application of official proceedings privilege to 

disclosure of trade secret information.” AccuImage Diagnostics 

Corp v. Terarecon, Inc., 260 F. Supp. 2d 941, 953 (N.D. Cal. 

2003) (Patel, J.) 

Case 2:13-cv-01770-MCE-AC Document 38 Filed 12/20/13 Page 19 of 34
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

20 

treatises, and restatements as guidance. 

However, where there is no convincing 

evidence that the state supreme court would 

decide differently, a federal court is 

obligated to follow the decisions of the 

state’s intermediate appellate courts. 

Lewis v. Tel. Emps. Credit Union, 87 F.3d 1537, 1545 (9th Cir. 

1996) (internal quotations and citations omitted). 

To begin, it is necessary to review the definition of trade 

secret. Under CUTSA, a “trade secret” is information that: 

(1) Derives independent economic value, 

actual or potential, from not being generally 

known to the public or to other persons who 

can obtain economic value from its disclosure 

or use; and 

(2) Is the subject of efforts that are 

reasonable under the circumstances to 

maintain its secrecy. 

Cal. Civ. Code § 3426.1(d). “The sine qua non of a trade 

secret . . . is the plaintiff’s possession of information of a 

type that can, at the possessor’s option, by made known to 

others, or withheld from them, i.e., kept secret.” Silvaco Data 

Sys. v. Intel Corp., 184 Cal. App. 4th 210, 220 (2010), 

disapproved on other grounds by Kwikset Corp. v. Superior Court, 

51 Cal. 4th 310 (2011). “Trade secret law, in short, protects 

only the right to control the dissemination of information.” Id. 

at 221 (emphasis in original). 

 CUTSA features a peculiarly-worded savings provision: 

(a) Except as otherwise expressly provided, 

this title does not supersede any statute 

relating to misappropriation of a trade 

secret, or any statute otherwise regulating 

trade secrets. 

Case 2:13-cv-01770-MCE-AC Document 38 Filed 12/20/13 Page 20 of 34
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

21 

(b) This title does not affect 

(1) contractual remedies, whether or not 

based upon misappropriation of a trade 

secret, (2) other civil remedies that are not 

based upon misappropriation of a trade 

secret, or (3) criminal remedies, whether or 

not based upon misappropriation of a trade 

secret. 

(c) This title does not affect the disclosure 

of a record by a state or local agency under 

the California Public Records Act . . . . 

Cal. Civ. Code § 3426.7. As a California appeals court noted, 

this provision “contains two savings clauses, but no explicit 

declaration of supersessive effect from which to ‘save’ 

anything.” Silvaco, 184 Cal. App. 4th at 233. That court 

nevertheless went on to reason that the provision’s “peculiar 

construction . . . is best understood as assuming that CUTSA 

would occupy the field of trade secrets liability, and as seeking 

to limit the Act’s supersessive effect only as it might impair 

the specified statutes and remedies.” Id. at 234 (emphasis in 

original).10 It is now generally accepted that “CUTSA provides the 

exclusive civil remedy for conduct falling within its terms, so 

as to supersede other civil remedies ‘based upon misappropriation 

of a trade secret.’” Id. at 236 (quoting Cal. Civ. Code 

§ 3426.7(a), (b)); accord K.C. Multimedia, 171 Cal. App. 4th at 

954 (“§ 3426.7 implicitly preempts alternative civil remedies 

 

10 These “statutes and remedies” include, e.g., Cal. Pen. Code 

§ 499c (criminalizing theft of trade secrets), Cal Pen. Code 

§ 502 (criminalizing, inter alia, unauthorized access to computer 

systems in order to obtain data); Cal. Gov’t Code § 6254.26 

(exempting from disclosure under the California Public Records 

Act certain information regarding “alternative investments” in 

which state public investment funds invest), and so forth. A more 

comprehensive list can be found at Silvaco, 184 Cal. App. 4th at 

235 n. 17.

Case 2:13-cv-01770-MCE-AC Document 38 Filed 12/20/13 Page 21 of 34
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

22 

based on trade secret misappropriation.”). Both parties appear to 

be in agreement with this principle. 

 Defendants’ motion to dismiss is based on a recent line of 

cases that have extended CUTSA’s reach to hold that the statute 

also supersedes civil remedies for misappropriation of 

confidential or proprietary information that does not qualify for 

trade secret protection. Two main policy rationales underlie this 

approach. First, if CUTSA did not supersede these claims, then 

misappropriation of non-trade secrets would justify a broader 

range of civil remedies than misappropriation of trade secrets; 

it is arguable that such a result is perverse, since non-trade 

secrets seem to be both less valuable and subject to fewer 

protective measures than trade secrets. See SunPower Corp. v. 

SolarCity Corp., No. 12-CV-00694-LHK, 2012 WL 6160472, 2012 U.S. 

Dist. LEXIS 176284 (N.D. Cal. Dec. 11, 2012) (Koh, J.) (“To [not 

recognize the full extent of CUTSA supersession] would allow 

plaintiffs to avoid the preclusive effect of CUTSA (and thereby 

plead potentially more favorable common-law claims) by simply 

failing to allege one of the elements necessary for information 

to qualify as a trade secret.”).11 The second rationale rests on 

the premise that the law must recognize some property interest in 

information before its misappropriation may be deemed unlawful. 

See, e.g., Silvaco, 184 Cal. App. 4th at 239 n. 22 (“Information 

that does not fit this definition [of “trade secret,” under 

CUTSA], and is not otherwise made property by some provision of 

positive law, belongs to no one, and cannot be converted or 

 

11 This suggests a broader supersession than the savings clause 

might well support. 

Case 2:13-cv-01770-MCE-AC Document 38 Filed 12/20/13 Page 22 of 34
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

23 

stolen.”); Feist Publ’ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 

340, 344 (1991) (“That there can be no valid copyright in facts 

is universally understood.”). One test for supersession that 

emerges from caselaw is as follows: 

[A plaintiff’s] claims based on its non-trade 

secret proprietary information are superseded 

unless one of the following conditions is 

met: (1) [the plaintiff] can allege facts 

that show that the non-trade secret 

proprietary information was made property by 

some provision of positive law on grounds 

that are qualitatively different from the 

grounds upon which trade secrets are 

considered property or (2) it can otherwise 

be concluded that [the non-trade secret 

claims] allege wrongdoing that is materially 

distinct from the wrongdoing alleged in a 

CUTSA claim. 

SunPower Corp., 2012 WL 6160472 at *9, 2012 U.S. Dist. LEXIS 

176284 at *29 (internal quotations and citations omitted) 

(dismissing claims for breach of confidence, conversion, trespass 

to chattels, and unfair competition based on CUTSA supersession); 

see also Heller v. Cepia, L.L.C., No. C 11-01146 JSW, 2012 WL 

13572 at *7, 2012 U.S. Dist. LEXIS 660 at *21 (N.D. Cal. Jan. 4, 

2012) (White, J.) (dismissing claims for misappropriation, 

conversion, unjust enrichment, and trespass to chattels based on 

CUTSA supersession, in part because plaintiff failed to 

“identif[y] any law that confers property rights on his non-trade 

secret confidential information.”); see also Silvaco, 184 Cal. 

App. 4th at 239 n. 22 (in dicta, “emphatically reject[ing] . . . 

the suggestion that the uniform act was not intended to preempt 

‘common law conversion claims based on the taking of information 

Case 2:13-cv-01770-MCE-AC Document 38 Filed 12/20/13 Page 23 of 34
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

24 

that, though not a trade secret, was nonetheless of value to the 

claimant.’”); see also Mattel, Inc. v. MGA Entm’t, Inc., 782 F. 

Supp. 2d 911, 987 (C.D. Cal. 2011) (Carter, J.) (holding, on 

summary judgment, that “[C]UTSA supersedes claims based on the 

misappropriation of confidential information, whether or not that 

information meets the statutory definition of a trade secret.”). 

 That said, several courts have held that the question of 

whether claims are superseded by CUTSA is a fact-based inquiry 

better suited for summary judgment than a motion to dismiss: 

Some courts have split the baby by electing 

to dismiss claims under CUTSA’s savings 

clause only after determining that the 

protected information was a trade secret. 

[citations omitted.] But this approach puts 

parties in the uncomfortable position of 

conceding CUTSA liability in order to prevail 

on another claim. The better approach may be 

to determine whether the information alleged 

to have converted was “made property by some 

provision of positive law,” Silvaco, 184 

Cal.App.4th at 239 n. 22, on grounds that are 

qualitatively different from the grounds upon 

which trade secrets are considered property. 

Resolving this question requires analysis of 

the facts: namely, what the confidential or 

proprietary information is, how it was 

converted, and the property interest alleged 

to have harmed as a result of that 

conversion. All of these questions can be 

addressed at summary judgment and/or trial. 

Bryant v. Mattel, Inc., No. CV 04–9049 DOC (RNBx), 2010 WL 

3705668 at *22, 2010 U.S. Dist. LEXIS 103851 at *74 (C.D. Cal. 

Aug. 2, 2010) (Carter, J.). Accord Amron Intern. Diving Supply, 

Inc. v. Hydrolinx Diving Commc’n, Inc., No. 11–CV–1890, 2011 WL 

5025178 at *10, 2011 U.S. Dist. LEXIS 122420 at *27 (S.D. Cal. 

Oct. 21, 2011) (Huff, J.) (“At this point in the case, the status 

Case 2:13-cv-01770-MCE-AC Document 38 Filed 12/20/13 Page 24 of 34
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

25 

of the information is merely a matter of allegation and until the 

distinction is made between [plaintiff’s] allegedly 

misappropriated trade secret information and its confidential or 

non-confidential proprietary non-trade secret information, the 

question of preemption should not be addressed.”). 

The court is of the view that the question of supersession 

is properly addressed at summary judgment. Defendants challenge 

Plaintiff’s use of the phrase “confidential, proprietary, and 

trade secret information” without describing what the 

“confidential” and/or “proprietary” information consists of,12

writing that the Complaint “fails to identify with any reasonable 

particularity where its trade secrets stop and its non-trade 

secret but still protectable information begins.” (Reply 2.) The 

Complaint puts Defendants on sufficient notice (i) that these 

categories of information exist and (ii) that they provide a 

basis for claims for breach of the duty of loyalty, breach of the 

duty of confidence, statutory unfair competition, and conversion. 

Defendants can determine in discovery whether Plaintiff’s 

contentions have any merit, and when appropriate, bring a summary 

judgment motion as to the issue of supersession. 

D. Has plaintiff made out a claim for conversion against 

Albanese and against the Entity Defendants? 

Plaintiff’s sixth cause of action, for conversion, is pled 

against all of the Defendants. Albanese and the Entity Defendants 

 

12 The one exception, in paragraph 130, is substantially similar 

to the description of the Confidential Information in paragraph 

24, except that it identifies (i) certain business plans and 

(ii) “all other confidential and proprietary information that 

Defendants has access to and stole.” 

Case 2:13-cv-01770-MCE-AC Document 38 Filed 12/20/13 Page 25 of 34
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

26 

move to dismiss, on the grounds that the complaint only alleges 

acts of conversion by Hofioni. (Motion 19-20.) Plaintiff does not 

address this argument in its opposition, though, in arguing 

against CUTSA supersession, plaintiff asserts that its claim for 

conversion is based on Hofioni’s alleged misappropriation of a 

laptop, gift cards and moneys, and tangible company documents. 

(Opposition 11-12.) 

 The elements of conversion under California law are “(1) the 

plaintiff’s ownership or right to possession of personal 

property; (2) the defendant’s disposition of the property in a 

manner that is inconsistent with the plaintiff’s property rights; 

and (3) resulting damages.” Fremont Indem. Co. v. Fremont Gen. 

Corp., 148 Cal. App. 4th 97, 119 (2007) (cited for this 

proposition in 5 Witkin, Summary of Cal. Law: Torts (2013 Supp.) 

§ 699, pp. 214-15). California courts “have traditionally refused 

to recognize as conversion the unauthorized taking of intangible 

interests that are not merged with, or reflected in, something 

tangible,” Thrifty-Tel, Inc. v. Bezenek, 46 Cal. App. 4th 1559, 

1565 (1996), though there are recognized exceptions where “both 

the property and the owner’s right of possession and exclusive 

use are sufficiently definite and certain.” Fremont Indem., 148 

Cal. App. 4th at 125. 

 The complaint provides: 

[Plaintiff] is informed and believes, and 

based thereon alleges, that Hofioni and 

Albanese agreed among themselves, and with 

representatives of the LIT Group and its 

related entities, prior to Hofioni and 

Albanese commencing their employment with The 

LIT Group and its related entities and 

Case 2:13-cv-01770-MCE-AC Document 38 Filed 12/20/13 Page 26 of 34
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

27 

thereafter, to take the actions set forth 

herein to wrongfully convert property 

belonging to [Plaintiff]. (Complaint ¶ 154.) 

While this paragraph, in its use of the phrase “wrongfully 

convert property,” verges on the sort of conclusory allegation 

forbidden by Twombly and Iqbal, there are sufficient additional 

facts pled in the complaint to make clear that Hofioni is accused 

of converting a laptop, gift cards, and company documents.13 The 

remainder of this paragraph alleges that Hofioni converted these 

items based on an agreement to do so with Albanese and the Entity 

Defendants. 

Recall that the elements of a conspiracy are (1) formation 

and operation of a conspiracy; (2) wrongful acts done in 

furtherance of the agreed-to plan; and (3) resulting damages. 

Applied Equip. Corp., 7 Cal. 4th at 511. Paragraph 154, supra, 

satisfies the first element. Hofioni’s alleged retention of the 

laptop, and taking of the gift cards and documents, satisfies the 

second element. Finally, Plaintiff has alleged that “Defendants 

have already caused U.S. Legal Support monetary damage.” (Id. 

¶ 100.) 

 In sum, Plaintiff has adequately pled both Hofioni’s 

conversion of its property and the existence of a conspiracy 

among all of the Defendants to carry out this conversion. 

 

13 As to the latter - in an email dated July 21, 2013, Hofioni 

informed Plaintiff that he had “shredded items.” (Complaint 

¶ 70.) This email was in response to Plaintiff’s demand that 

Hofioni “fully and unconditionally certify that he did not have 

any confidential business information or trade secret information 

belonging” to Plaintiff. (Id. ¶ 69.) Plaintiff asserts that it is 

reasonable to infer from this exchange that Hofioni had converted 

tangible company documents. (Opposition 11.) The court agrees. 

Case 2:13-cv-01770-MCE-AC Document 38 Filed 12/20/13 Page 27 of 34
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

28 

Accordingly, the motion to dismiss this cause of action is 

denied. 

E. Has Plaintiff stated a statutory unfair competition 

claim? 

California’s statutory unfair competition law (“UCL”) 

prohibits “any unlawful, unfair or fraudulent business act or 

practice and unfair, deceptive, untrue or misleading advertising 

and any act prohibited by [the false advertising law (§ 17500 et

seq.)].” Cal. Bus. & Prof. Code § 17200. According to the 

California Supreme Court, the statute recognizes three varieties 

of unfair competition: acts or practices that are (i) unlawful, 

(ii) unfair, or (iii) fraudulent. Cel-Tech Commc’ns., Inc. v. Los 

Angeles Cellular Tel., 20 Cal. 4th 163, 180 (1999); accord Rose 

v. Bank of Am., N.A., 57 Cal. 4th. 390, 394 (2013). 

Defendants contend that a “plaintiff is required to state 

with reasonable particularity the facts supporting an alleged 

violation of the UCL.” (Motion 15.) However, in support of this 

contention, they cite Khoury v. Maly’s of Cal., 14 Cal. App. 4th 

612, 619 (1993) and Saunders v. Superior Court, 27 Cal. App. 4th 

832, 841-42 (1994). These decisions address California, rather 

than federal, pleading standards. California, as a code pleading 

jurisdiction, requires complaints to contain “[a] statement of 

the facts constituting the cause of action, in ordinary and 

concise language.” Cal. Code Civ. Proc. § 425.10(a)(1). By 

contrast, under Rule 8, “[t]he pleader [in federal court] . . . 

is not restricted to statement of the ‘facts.’” 4 Witkin, Cal. 

Procedure: Pleading (5th ed. 2008) § 379, p. 515. While Twombly 

and Iqbal “have paved the way for a heightened ‘plausibility’ 

Case 2:13-cv-01770-MCE-AC Document 38 Filed 12/20/13 Page 28 of 34
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

29 

pleading standard that requires plaintiffs to provide greater 

factual development in their complaints in order to survive a 

Rule 12(b)(6) motion to dismiss,” 5 Charles Alan Right & Arthur 

R. Miller, Fed. Practice and Procedure: Civil § 1202 (3d ed. 

2012), it is nevertheless axiomatic that, even where state law 

claims are alleged, “[t]he manner and details of pleading in the 

federal courts are governed by the Federal Rules of Civil 

Procedure regardless of the source of substantive law to be 

applied in the particular action.” Id. § 1204. “[A] federal 

pleading that satisfies the Rule 8(a) standard will not be 

dismissed simply because it would be vulnerable to a 

demurrer . . . in a forum state court.” Id. 

Despite the parties’ joint failure to properly brief this 

matter, the court will evaluate defendants’ motion under federal 

law. 

1. “Unlawful” 

Plaintiff alleges unlawful conduct under the UCL. “By 

proscribing ‘any unlawful’ business practice, [the UCL] borrows 

violations of other laws and treats them as unlawful practices 

that the unfair competition law makes independently actionable.” 

Cel-Tech, 20 Cal. 4th at 180. 

 Defendants move to dismiss, contending that Plaintiff 

“cannot point to any ‘unlawful’ conduct on Defendants’ part. It 

thus cannot allege an ‘unlawful’ act or practice under [the 

UCL.]” (Motion 17-18.) Their argument presumes that Plaintiff’s 

non-CUTSA claims are superseded; they write, “The remaining 

allegations of ‘unlawful’ practices relate to misappropriation, 

Case 2:13-cv-01770-MCE-AC Document 38 Filed 12/20/13 Page 29 of 34
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

30 

which is preempted and otherwise insufficiently pled.” (Motion 

17.) 

 Defendants are correct, insofar as the court has dismissed 

Plaintiff’s cause of action for trade secrets misappropriation 

under a respondeat superior theory. However, as discussed supra, 

Plaintiff has satisfactorily pled causes of action for trade 

secrets misappropriation and conversion against the Entity 

Defendant, both pursuant to conspiracy. These causes of action, 

in turn, are a sufficient basis for alleging “unlawful” conduct 

under the UCL. Plaintiff has also adequately pled causes of 

action for trade secrets misappropriation, breach of contract, 

breach of the duty of loyalty, breach of the duty of 

confidence, conversion, and fraud against Hofioni and Albanese, 

which, in turn, will support claims under the UCL’s “unfawful” 

prong against these individual defendants. 

Accordingly, the motion to dismiss Plaintiff’s cause of 

action under the UCL “unlawful” prong will be denied. 

2. “Unfair” 

Plaintiff alleges unfair competition under the UCL. 

Defendants counter that, “Where a plaintiff fails to state 

an antitrust claim, and an unfair competition claim is based upon 

the same allegations, the [latter] is properly dismissed.” 

(Motion 16.) In support, Defendants quote Cel-Tech, 20 Cal. 4th 

at 186-7, for the proposition that “[t]he inquiry as to what is 

‘unfair’ is limited to ‘conduct that threatens an incipient 

violation of an anti-trust law, or violates the policy and spirit 

of one of those laws because its effects are comparable to or the 

Case 2:13-cv-01770-MCE-AC Document 38 Filed 12/20/13 Page 30 of 34
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

31 

same as a violation of the law, or otherwise significantly 

threatens or harms competition.’” (Id.) 

Defendant’s position is puzzling. Cel-Tech does not require 

plaintiffs to base UCL unfair conduct claims solely on antitrust 

violations; the quoted passage quite clearly provides that such 

claims may be based on conduct which “otherwise significantly 

threatens or harms competition.” 

It is well-settled that misappropriation of trade secrets in 

violation of CUTSA can form the predicate for an unfair 

competition claim under the UCL. See Courtesy Temp. Servs. v. 

Camacho, 222 Cal. App. 3d 1278, 1292 (“[T]he cases are legion 

holding that a former employee’s use of confidential information 

obtained from his former employer to compete with him and to 

solicit the business of his former employer’s customers, is 

regarded as unfair competition.”) 

As Plaintiff has pled a cause of action for trade secrets 

misappropriation against all of the Defendants, it may proceed 

against them under the UCL’s “unfair” prong. 

3. “Fraudulent” 

 Plaintiff alleges fraudulent conduct under the UCL. 

 Defendants move to dismiss, on the grounds that Plaintiff 

“has not alleged any conduct that is likely to deceive the 

public,” a requirement for a UCL fraud claim. (Motion 18.) 

 Plaintiff responds that paragraph 144 of the complaint 

adequately alleges fraud: 

U.S. Legal Support is informed and believes 

that the statements made by The LIT Group and 

its related entities in their marketing 

materials contain false and misleading 

Case 2:13-cv-01770-MCE-AC Document 38 Filed 12/20/13 Page 31 of 34
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

32 

statements because they describe 

relationships with companies that The LIT 

Group and its related entities do not in fact 

have. 

While the court is satisfied that consumers of legal services 

could be deceived by false statements about the identities of 

Defendants’ customers, it does not appear that Plaintiff has 

standing to raise a UCL fraud claim. California’s Proposition 64 

added language “impos[ing] an actual reliance requirement on 

plaintiffs prosecuting a private enforcement action under the 

UCL’s fraud prong.” In re Tobacco II Cases, 46 Cal. 4th 298, 326 

(2009). “Reliance is proved by showing that the defendant’s 

misrepresentation or nondisclosure was an immediate cause of the 

plaintiff’s injury-producing conduct.” Id. (quoting Mirkin v. 

Wasserman, 5 Cal. 4th 1082, 1110-11 (1993)). 

As Plaintiff is not a consumer of Defendants’ services, it 

cannot demonstrate reliance on Defendants’ fraudulent statements 

in order to establish standing under the UCL’s fraud prong. 

Accordingly, this claim will be dismissed with prejudice. 

4. Damages 

 It is well-settled that the UCL provides only equitable 

remedies, typically in the form of injunctive relief and 

restitution. Cal. Bus. & Prof. Code § 17203; see also Clayworth 

v. Pfizer, Inc., 49 Cal. 4th 758, 789-90 (2010) (“Section 17203 

makes injunctive relief the primary form of relief available 

under the UCL, while restitution is merely ancillary.”) 

 Defendants contend that Plaintiff illegitimately seeks 

compensatory damages under the UCL. (Motion 18-19.) Plaintiff 

counters that it seeks no such damages, having pled: 

Case 2:13-cv-01770-MCE-AC Document 38 Filed 12/20/13 Page 32 of 34
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

33 

As a proximate result of Defendants’ abovementioned acts, including those by Hofioni 

and Albanese for themselves and under the 

agreement alleged above, U.S. Legal Support 

suffered an injury in fact, has lost money or 

property as a result, and faces continued 

irreparable injury. Further, Defendants have 

been unjustly enriched in an amount to be 

proven at the time of trial, but which is in 

excess of the minimal jurisdictional amount 

of this Court, entitling U.S. Legal Support 

to restitution and/or other equitable relief. 

(Complaint ¶ 148.) 

Plaintiff does not appear to seek remedies other than 

equitable relief. Defendants’ motion to dismiss Plaintiff’s 

damages plea is therefore denied. 

IV. CONCLUSION 

In light of the foregoing, the court hereby orders as 

follows: 

[1] To the extent that is based on a respondeat superior

theory of liability, the first cause of action 

(misappropriation of trade secrets) is DISMISSED without 

prejudice as to The LIT Group, Hutchings Court Reporters, 

LLC, and Litigation Services. 

[2] To the extent that is pled on the basis of fraudulent 

conduct, the fifth (statutory unfair competition) cause of 

action is DISMISSED with prejudice. 

[3] The eighth cause of action (conspiracy) is DISMISSED 

with prejudice. Plaintiff may re-allege the elements of a 

conspiracy in any amended complaint, but should not plead 

conspiracy as a standalone cause of action. 

Case 2:13-cv-01770-MCE-AC Document 38 Filed 12/20/13 Page 33 of 34
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

34 

[4] In all other respects, the motion to dismiss is DENIED. 

[5] Plaintiff is GRANTED leave to file an amended complaint 

no later than twenty-one (21) days after docketing of this 

order. 

IT IS SO ORDERED. 

DATED: December 19, 2013. 

Case 2:13-cv-01770-MCE-AC Document 38 Filed 12/20/13 Page 34 of 34