Inszone Insurance Services Inc vs. Dustin Lofrano

Nature of Proceeding: Hearing on Demurrer to Second Amended Complaint (Lofrano)

Filed By: Kachmar, James

Defendants Bertolino Insurance Agency, Inc. and Dustin Lofrano (“Lofrano”)
(collectively “Defendants”) demurrer to Plaintiff’s fourth cause of action the second
amended complaint (“SAC”) is ruled upon as follows.

The Court notes that although Wayne Seefeldt is a moving defendant, Mr. Seefeldt
was dismissed on April 24, 2014.

This is an action for Misappropriation of Trade Secrets and Unfair Business Practices
against several defendants relating to their alleged use of plaintiff’s claimed trade
secrets/confidential information in order to solicit the business of the latter’s existing
clientele. The action is based largely on a confidentiality agreement which defendant
Lofrano signed in January 2012 while employed by plaintiff.

Defendants demur to the fourth cause of action for Unfair Business Practices on the
grounds that it is preempted by the California Uniform Trade Secret Act (“CUTSA”)
found at Civil Code §3426 et seq. “A claim for common law or even statutory unfair
competition may be preempted under CC[] §3426.7 if it relies on the same facts as the
misappropriation claim.” (K.C. Multimedia, Inc. v. Bank of America Technology &
Operations, Inc. (2009) 171 Cal.App.4th 939, 958-962.)

In ruling on Defendants’ demurrer to the original complaint, the Court agreed with
Defendants that the Unfair Business Practices cause of action was preempted by
CUTSA inasmuch as it was duplicative of the Misappropriation of Trade Secrets cause
of action.

Here, however, Plaintiff has amended the complaint such that the Unfair Business
Practices cause of action is no longer duplicative of the Misappropriation of Trade
Secrets cause of action. In the Unfair Business Practices Cause of Action, Plaintiff
alleges that “in addition to and separate from stealing and misappropriating Plaintiff’s
trade secrets, Defendants stole, and are holding onto, insurance forms, exemplars,
files and/or other documents and other items which are the property of
Plaintiffs.” (SAC ¶41.) These items are other than that of Plaintiff’s trade secrets. (Id.)

Taking these allegations as true, these allegations are sufficient. Moreover, the
allegations are different from those in K.C. Multimedia, Inc., which were expressly
premised on the defendant’s misappropriation of trade secrets and conspiracy to
misappropriate trade secrets. Nor does Silvaco Data Systems v. Intel Corp. (2010)
184 Cal. App. 4th 210, 238-239 assist Defendants. In Silvaco, the court explained “if
the only arguable property identified in the complaint is a trade secret, and the only
basis for any property right is trade secrets law, then a conversion claim predicated on
the theft of that property is unquestionably “based upon misappropriation of a trade
secret” (§ 3426.7, subd. (b)) and the conversion claim is preempted. The only thing
that might change this conclusion is the plaintiff’s assertion of some other basis in fact
or law on which to predicate the requisite property right.” Here, given the facts in the
SAC, the Court cannot find as a matter of law that the only arguable property identified
in the complaint is a trade secret.
Accordingly, the demurrer is OVERRULED.

Defendants shall file and serve their answer by no later than June 9, 2014.

The minute order is effective immediately. No formal order pursuant to CRC Rule
3.1312 or further notice is required.