Case Name: BBBB Bonding Corporation v. Ashley Pilling-Miller, et al.

Case No.: 17CV318613

Defendant Ashley Pilling-Miller’s Demurrer to Plaintiff’s Complaint for Damages

Plaintiff BBBB Bonding Corporation (“Bad Boys”) is a leading company in the provision of bail bonds in Northern and Southern California. (Complaint, ¶6.) Bad Boys continues to grow due to its innovative marketing techniques which include the creation and use of a confidential list of attorneys who refer clients to Bad Boys. (Id.)

Bad Boys employed defendant Ashley Pilling-Miller (“Miller”) from November 12, 2013 until her resignation on or about June 26, 2017. (Complaint, ¶7.) While employed at Bad Boys, defendant Miller had access to Bad Boys’ proprietary information and trade secrets including, but not limited to, the confidential list of referring attorneys (“Confidential Information”). (Complaint, ¶¶7 – 8.) In recognition of this fact, defendant Miller signed a confidentiality agreement. (Complaint, ¶8.) Miller misappropriated Bad Boys’ trade secrets and breached the confidentiality agreement by, among other things, taking and sharing Bad Boys’ Confidential Information with Ryan Leary, an employee of Premiere Bail Bonds, for her own personal gain and without the authority, consent, or permission of Bad Boys. (Complaint, ¶¶9, 11, 12, 13, and 16.) As a result of defendant Miller’s acts, Bad Boys has suffered damages and lost revenue. (Complaint, ¶¶10 and 15.)

On November 3, 2017, plaintiff Bad Boys filed a complaint against defendant Miller asserting causes of action for:

(1) Violation of the Uniform Trade Secrets Act
(2) Conversion
(3) Intentional Interference with Prospective Business Advantage
(4) Violation of Labor Code §2860
(5) Violation of Labor Code §§2854, 2865
(6) Unlawful, Unfair, and Fraudulent Competition Under California Business & Professions Code §17200, et seq.
(7) Breach of Contract
(8) Breach of Fiduciary Duty
(9) Violation of Federal Computer Fraud and Abuse Act (18 U.S.C. §§1030(a)(2)(C) & (a)(4) & (a)(5))
(10) Violation of Computer Data Access and Fraud Act (Cal. Penal Code §502)

On December 21, 2017, defendant Miller filed the motion now before the court, a demurrer to the first, fifth, and ninth causes of action in plaintiff Bad Boys’ complaint.

I. Defendant Miller’s demurrer to the first cause of action is OVERRULED.

“A trade secret is misappropriated if a person (1) acquires a trade secret knowing or having reason to know that the trade secret has been acquired by ‘improper means,’ (2) discloses or uses a trade secret the person has acquired by ‘improper means’ or in violation of a nondisclosure obligation, (3) discloses or uses a trade secret the person knew or should have known was derived from another who had acquired it by improper means or who had a nondisclosure obligation or (4) discloses or uses a trade secret after learning that it is a trade secret but before a material change of position.” (Ajaxo Inc. v. E*Trade Group Inc. (2005) 135 Cal.App.4th 21, 66; see also CACI, Nos. 4400 – 4401.)

Code of Civil Procedure section 2019.210 states, “In any action alleging the misappropriation of a trade secret under the Uniform Trade Secrets Act …, before commencing discovery relating to the trade secret, the party alleging the misappropriation shall identify the trade secret with reasonable particularity subject to any orders that may be appropriate under Section 3426.5 of the Civil Code.” Code of Civil Procedure section 2019.210 creates a preliminary hurdle in the discovery process for a party alleging trade secret misappropriation. The legislature intended Code of Civil Procedure section 2019.210 to codify the rule stated in Diodes, Inc. v. Franzen (1968) 260 Cal.App.2d 244 (Diodes).

In Diodes, the court held that a plaintiff alleging misappropriation of a trade secret “should describe the subject matter of the trade secret with sufficient particularity to separate it from matters of general knowledge in the trade or of special knowledge of those persons who are skilled in the trade, and to permit the defendant to ascertain at least the boundaries within which the secret lies.” (Diodes, supra, 260 Cal.App.2d at p. 253.) The main purpose of the rule is “to give both the court and the defendant reasonable notice of the issues which must be met at the time of trial and to provide reasonable guidance in ascertaining the scope of appropriate discovery.” (Id.) Although Code of Civil Procedure section 2019.210 does not require plaintiff to “spell out the details of the trade secret,” it does require that plaintiff do more than allege in conclusory fashion that he has a trade secret. (Id. at p. 252.)

Defendant Miller contends plaintiff Bad Boys has not identified its trade secret with reasonable particularity. Here, plaintiff Bad Boys alleges its trade secret includes “a confidential list of attorneys who refer clients to [Bad Boys] based on [Bad Boys’] high level of service and professionalism.” (Complaint, ¶6.) Defendant Miller contends this is not trade secret because it consists of nothing more than a list of criminal defense attorneys in the area which is publicly available by conducting a basic search on the Internet. Defendant Miller’s argument, however, challenges whether the list of referring attorney is actually a trade secret, not whether the trade secret has been identified with reasonable particularity. The court finds Bad Boys’ first cause of action adequately alleges a claim for violation of the Uniform Trade Secrets Act.

Accordingly, defendant Miller’s demurrer to plaintiff Bad Boys’ first cause of action on the ground that the pleading does not state facts sufficient to constitute a cause of action [Code Civ. Proc., §430.10, subd. (e)] for violation of the Uniform Trade Secrets Act is OVERRULED.

II. Defendant Miller’s demurrer to the fifth cause of action is SUSTAINED.

Plaintiff Bad Boys’ fifth cause of action alleges defendant Miller violated Labor Code sections 2854 and 2865. Section 2854 states, “One who, for a good consideration, agrees to serve another, shall perform the service, and shall use ordinary care and diligence therein, so long as he is thus employed.” Section 2865 states, “An employee who is guilty of a culpable degree of negligence is liable to his employer for the damage thereby caused to the employer. The employer is liable to the employee if the service is not gratuitous, for the value of the services only as are properly rendered.”

According to Bad Boys, defendant Miller “breached the aforementioned duties by soliciting [Bad Boys’] referring attorneys and asking them to advise their clients to use Premiere Bail Bonds as their bail bond provider rather than [Bad Boys].” (Complaint, ¶41.)

Defendant Miller demurs to this fifth cause of action by arguing that the fifth cause of action alleges intentional conduct rather than negligent conduct. In opposition, Bad Boys contends the word “intentional” does not appear anywhere in the fifth cause of action. However, the act of “soliciting” and “asking” referring attorneys to advise their clients to use another bail bond company would appear to be a volitional act. Although the word, “intentional,” is not alleged, the fifth cause of action goes beyond mere negligence. The conduct alleged in the fifth cause of action would appear to be subsumed by other theories already pleaded by plaintiff.

Accordingly, defendant Miller’s demurrer to plaintiff Bad Boys’ fifth cause of action on the ground that the pleading does not state facts sufficient to constitute a cause of action [Code Civ. Proc., §430.10, subd. (e)] for violation of Labor Code §§2845, 2865 is SUSTAINED with 10 days’ leave to amend.

III. Defendant Miller’s demurrer to the ninth cause of action is SUSTAINED.

“Whoever intentionally accesses a computer without authorization or exceeds authorized access, and thereby obtains information from any protected computer, shall be punished as provided in subsection (c) of this section.” (18 U.S.C. §1030, subd. (a)(2)(C).)

“Whoever knowingly and with intent to defraud, accesses a protected computer without authorization, or exceeds authorized access, and by means of such conduct furthers the intended fraud and obtains anything of value, unless the object of the fraud and the thing obtained consists only of the use of the computer and the value of such use is not more than $5,000 in any 1-year period, shall be punished as provided in subsection (c) of this section.” (18 U.S.C. §1030, subd. (a)(4).)

“Whoever (A) knowingly causes the transmission of a program, information, code, or command, and as a result of such conduct, intentionally causes damage without authorization, to a protected computer; (B) intentionally accesses a protected computer without authorization, and as a result of such conduct, recklessly causes damage; or (C) intentionally accesses a protected computer without authorization, and as a result of such conduct, causes damage and loss, shall be punished as provided in subsection (c) of this section.” (18 U.S.C. §1030, subd. (a)(5).)

Plaintiff Bad Boys alleges defendant Miller violated each of the above provisions. In demurring to the ninth cause of action, defendant Miller relies principally upon United States v. Nosal (9th Cir. 2012) 676 F.3d 854 (Nosal) to argue that the Computer Fraud and Abuse Act [CFAA], 18 U.S.C. §1030, does not apply to claims of misappropriation.

David Nosal used to work for Korn/Ferry, an executive search firm. Shortly after he left the company, he convinced some of his former colleagues who were still working for Korn/Ferry to help him start a competing business. The employees used their log-in credentials to download source lists, names and contact information from a confidential database on the company’s computer, and then transferred that information to Nosal. The employees were authorized to access the database, but Korn/Ferry had a policy that forbade disclosing confidential information.1 The government indicted Nosal on twenty counts, including trade secret theft, mail fraud, conspiracy and violations of the CFAA. The CFAA counts charged Nosal with violations of 18 U.S.C. § 1030(a)(4), for aiding and abetting the Korn/Ferry employees in “exceed[ing their] authorized access” with intent to defraud.

(Nosal, supra, 676 F.3d at p. 856.)

The district court dismissed the CFAA counts against Nosal and the Ninth Circuit Court of Appeals affirmed the ruling. In doing so, the Nosal court held that the phrase, “exceeds authorized access,” as that term is defined by the CFAA, is narrowly limited to access restrictions and not to use restrictions. In other words, the employees in Nosal had the authority to access the information but were restricted against using the information in the way that they did. Under Nosal, only where there is no authority to access information is there a violation of the CFAA. Relying on Nosal, defendant Miller contends the same result should apply here because it is alleged that, “While employed by [Bad Boys], Defendant MILLER held a senior position at [Bad Boys] as a production agent in which she had access to and was well versed in [Bad Boys’] proprietary information and trade secrets.” (Complaint, ¶7.) “MILLER’s position with [Bad Boys] provided her with access to [Bad Boys’] Confidential Information.” (Complaint, ¶8.) “Defendant MILLER was a senior employee of [Bad Boys] in that her duties included the control of attorney operations directly assisting Ryan Leary and liaison to attorney clientele.” (Complaint, ¶7.)

It is defendant Miller’s position that these allegations conflict with or are inconsistent with allegations found at paragraphs 64 through 66 where it is alleged that she engaged in conduct “without authorization or by exceeding authorized access.” The allegations at paragraphs 7 to 8 of the complaint expressly allege defendant Miller had access to the Confidential Information which would include the confidential list of referring attorneys.

“Where a pleading includes a general allegation, such as an allegation of an ultimate fact, as well as specific allegations that add details or explanatory facts, it is possible that a conflict or inconsistency will exist between the more general allegation and the specific allegations.” [Citation. Footnote.] “To handle these contradictions, California courts have adopted the principle that specific allegations in a complaint control over an inconsistent general allegation.” [Citation.] “Under this principle, it is possible that specific allegations will render a complaint defective when the general allegations, standing alone, might have been sufficient.” [Citation.]

(Medical Marijuana, Inc. v. ProjectCBD.com (2016) 6 Cal.App.5th 602, 619.)

Plaintiff Bad Boys urges the court to focus on the allegations at paragraphs 64 – 66, but in view of the more specific allegations found at paragraphs 7 – 8, the court is inclined to find the more specific allegations trump the more general allegations. In spite of the strong dissent in Nosal and the Nosal court’s recognition of a split in the authority, this court will follow Nosal.

Accordingly, defendant Miller’s demurrer to plaintiff Bad Boys’ ninth cause of action on the ground that the pleading does not state facts sufficient to constitute a cause of action [Code Civ. Proc., §430.10, subd. (e)] for violation of federal Computer Fraud and Abuse Act (18 U.S.C. §§1030(a)(2)(C) & (a)(4) & (a)(5)) is SUSTAINED with 10 days’ leave to amend.