Case Name: Richtek USA, et al. vs. uPI Semiconductor Corp., et al.
Case No.: 2011-1-CV-192991

This is an action for trade secrets misappropriation filed by plaintiffs Richtek USA, Inc., a California corporation, and Richtek Technology, a Taiwanese corporation (collectively “Richtek”). Currently at issue are two related motions to dismiss by defendant uPI Semiconductor Corporation: a motion to dismiss pursuant to a forum selection agreement and a motion to dismiss pursuant to the doctrine of forum non conveniens.

I. Factual and Procedural Background

A. Richtek’s Allegations

The operative Amended Complaint (“AC”) alleges that Richtek is a world-wide leader of power management integrated circuit (“IC”) solutions, including DC-DC power controllers that regulate voltage and can convert a high DC voltage to a low DC voltage so devices can have lower DC power consumption. (FAC, ¶ 15.) Richtek’s proprietary technologies and trade secrets include innovative circuit designs, layouts, and methods that regulate power efficiently for modern electronic devices. (Id. at ¶ 16.) Richtek claims “Business Trade Secrets” including market survey data, customer contacts, product definitions with tailored solutions, product roadmaps, pricing strategies, customer feedback, and verification data, as well as “Technical Trade Secrets” related to its technologies. (Id. at ¶¶ 48-66.)

Richtek alleges that defendant uPI Corporation, a Taiwanese corporation, manufactures and sells power controllers, regulators, and converters for use in products containing them, including single buck controllers and multiple phase buck controllers, which regulate and can convert a high DC voltage to a low DC voltage and are based on Richtek’s misappropriated trade secrets. (AC, ¶ 17.) The AC lists various uPI power management products that are allegedly based on Richtek’s misappropriated trade secrets. (Id. at ¶¶ 21-22.) Richtek alleges that uPI has transacted with multiple American businesses (Advanced Micro Devices Apple, Hewlett Packard, Intel, nVidia, Broadcom, and Dell), resulting in the importation and sale of their products into California and the United States. (Id. at ¶¶ 24-43.)

Richtek alleges that various former employees developed a plan to improperly take its trade secrets for the purpose of illicitly competing with Richtek and profiting from that theft. (AC, ¶¶ 103-107.) Upon leaving Richtek, the former employees started soliciting business from Richtek’s customers on behalf of uPI and others. (Id. at ¶ 107.) By at least January 2008, most of the former Richtek employees were employed by uPI and continued to use Richtek’s misappropriated trade secrets with the full knowledge and cooperation of uPI to design, develop, manufacture, offer to sell, sell and import such products into the United States. (Id. at ¶ 109.) Richtek alleges on information and belief that the former Richtek employees violated their duty to Richtek, Richtek’s policies, and their employment agreements by copying and/or not returning Richtek’s trade secret information and disclosing them to uPI and others without Richtek’s consent. (Id. at ¶ 83.) Richtek further alleges that uPI engaged defendant Silicon Xtal (“SXC”) to use Richtek’s misappropriated trade secrets to conduct marketing and sales in the U.S. and to promote uPI’s Power Management IC Products to U.S. companies, many of which were previous Richtek U.S. customers. (Id. at ¶ 111.)

B. Additional Litigation Between the Parties

Judicially-noticed records establish that in 2007, Richtek Taiwan filed a criminal complaint in Taiwan for “disclosure of industrial and commercial secrets about business” and “breach of trust” against various individual uPI defendants and also filed a civil complaint in Taiwan alleging patent infringement and trade secret misappropriation against uPI and several individual uPI defendants. On December 2, 2009, Richtek filed a complaint with the United States International Trade Commission (“ITC”) against uPI under Section 337 of the Tariff Act of 1980 and also filed claims for patent infringement and trade secrets misappropriation against uPI and several corporate defendants in federal court (Richtek Technology Corp., et al. v. uPI Semiconductor Corp., et al., Case No. 3:09-cv-05659-WHA (N.D. Cal., Dec. 2, 2009)). The ITC investigation terminated on September 9, 2010, based in part on a consent order providing that uPI would not sell or import any DC-DC controllers or products using Richtek’s asserted trade secrets. On January 3, 2011, the district court dismissed the non-federal claims in the federal action and stayed all federal claims pending re-examination of the asserted patents.

C. Proceedings in This Action

On January 28, 2011, Richtek filed the instant state action for trade secret misappropriation following the federal court’s dismissal of these claims.

On May 23, 2012, the Court sustained the demurrer of uPI, SXC, and various individual uPI defendants to the original complaint on the ground that Richtek’s claim was time-barred under Taiwan’s borrowed two-year statute of limitations. The Court denied the uPI defendants’ related motion to dismiss based on forum non conveniens, finding that the untimeliness of the claim under Taiwanese law rendered Taiwan an unsuitable alternative forum. The Court denied as moot the individual uPI defendants’ motion to dismiss based on a forum selection agreement in their employment contracts with Richtek.

On June 4, 2012, Richtek filed the operative AC, which asserts eighteen counts of trade secret misappropriation against uPI, SXC, James Chang, Amanda Dai, YP Huang, JC Chen, and Ming Chen. On February 8, 2013, the Court again sustained a demurrer by uPI, Chang, and Huang on the basis of the Taiwanese statute of limitations, this time without leave to amend. It also granted a renewed motion to dismiss based on the forum selection agreement as to JC Chen, deeming the motion moot as to Chang and Huang in light of its ruling on their demurrer. It deemed a renewed motion to dismiss for forum non conveniens moot as to uPI and the individual defendants, but denied the motion as to SXC, finding that SXC had not shown whether an action against it in Taiwan would be barred by the statute of limitations.

Richtek appealed the June 4th ruling. On November 24, 2015, the Court of Appeal issued its opinion reversing the ruling on the demurrer and affirming the ruling as to the motion to dismiss based on the forum selection agreement. (See Richtek USA, Inc. v. uPI Semiconductor Corporation (2015) 242 Cal.App.4th 651.) With respect to the demurrer, the Court of Appeal found that the Court had improperly relied on judicially-noticed documents regarding the 2007 Taiwan complaints to conclude that Richtek had knowledge of the misappropriation at issue at the time those complaints were filed. It expressly did not reach the issue of whether the Taiwan statute of limitations applies to this action. (Id. at p. 661, fn. 5.) The Court of Appeal found that the mandatory forum selection provision in defendant JC Chen’s employment agreement required that the trade secret claims against him be filed in Taiwan. (Id. at pp. 661-662.)

Richtek subsequently dismissed individual defendants Chang and Huang, presumably because their employment with Richtek was governed by the same agreement containing the same forum selection clause as JC Chen’s. It also filed a request for dismissal with prejudice as to SXC. The parties indicated in a recent case management statement that Richtek and Ming Chen are near to concluding a settlement. It does not appear that Amanda Dai has appeared in this action. That leaves the claims against uPI at issue in these motions as the only remaining claims in active dispute.

II. Motion to Dismiss Pursuant to Forum Selection Agreement

uPI now moves to dismiss this action pursuant to the forum selection clause in the individual defendants’ employment agreements.

A. Waiver

As an initial matter, Richtek contends that uPI waived its arguments based on the forum selection clause by choosing not to join in the individual defendants’ earlier motions based on this clause.

“[O]bjections to the venue of an action,” including those based on forum selection agreements, “are waived unless promptly presented.” (Smith, Valentino & Smith, Inc. v. Superior Court (Life Ins. Co. of Pennsylvania) (1976) 17 Cal.3d 491, 497; see also Trident Labs, Inc. v. Merrill Lynch Commercial Finance Corp. (2011) 200 Cal.App.4th 147, 157 [unreasonable to enforce forum selection clause where defendant chose “to extensively litigate in the original forum by filing a cross-complaint, conducting substantial discovery, and filing motions seeking relief from the forum court”].)
Cases arising in the context of arbitration clauses are instructive with respect to this issue. Those cases consider the following factors with respect to waiver:

(1) whether the party’s actions are inconsistent with the right to arbitrate; (2) whether the litigation machinery has been substantially invoked and the parties were well into preparation of a lawsuit before the party notified the opposing party of an intent to arbitrate; (3) whether a party either requested arbitration enforcement close to the trial date or delayed for a long period before seeking a stay; (4) whether a defendant seeking arbitration filed a counterclaim without asking for a stay of the proceedings; (5) whether important intervening steps [e.g., taking advantage of judicial discovery procedures not available in arbitration] had taken place; and (6) whether the delay affected, misled, or prejudiced the opposing party.

(Sobremonte v. Superior Court (Bank of America Nat. Trust and Sav. Ass’n) (1998) 61 Cal.App.4th 980, 992, internal citations and quotations omitted.)

Here, uPI has not taken any actions inconsistent with its asserted right to have this action litigated in Taiwan. Rather, it has repeatedly filed forum non conveniens motions arguing that the action should be heard in Taiwan, and successfully demurred to the complaint based on the Taiwan statute of limitations. The delay caused by Richtek’s successful exercise of its right to appeal the Court’s ruling on uPI’s demurrer does not constitute a substantial invocation of the litigation machinery by uPI; furthermore, Richtek has not been prejudiced by uPI’s delayed assertion of the forum selection clause, since the Court deemed the earlier motion on that ground by individual defendants to be moot as to all parties to the demurrer. This action has not yet progressed beyond the pleading stage, and the only motions uPI has filed so far pertain to the initial issues of whether the complaint states a claim and should be heard in this Court.

Consequently, uPI has not waived its right to invoke the forum selection clause.

B. uPI’s Standing to Enforce the Forum Selection Clause

Richtek also contends that uPI lacks standing to enforce the forum selection clause, which is contained in a contract between Richtek and its individual former employees to which uPI is not a party.

uPI argues that it is “so closely related to the contractual relationship” at issue that it is entitled to enforce the forum selection clause. (Bancomer, S. A. v. Superior Court (Reilly) (1996) 44 Cal.App.4th 1450, 1461.) A non-signatory is permitted to enforce a forum selection clause under this theory where “(1) it agreed to be bound by the terms of the … agreement, (2) the contracting parties intended the [non-signatory] to benefit from the … agreement, or (3) there was sufficient evidence of a defined and intertwining business relationship with a contracting party.” (Ibid.) uPI contends that the third circumstance is present here. Regardless,
[t]he key to the closely related test is whether the nonsignatories were close to the contractual relationship, not whether they were close to the third party signator. This makes sense because the forum selection clause is part of the underlying contract, and it is the contractual relationship gone awry that presumably spawns litigation and activates the clause. Giving standing to all closely related entities honors general principles of judicial economy by making all parties closely allied to the contractual relationship accountable in the same forum, thereby abating a proliferation of actions and inconsistent rulings.
(Bugna v. Fike (2000) 80 Cal.App.4th 229, 235.)

Here, Richtek alleges that uTI’s founder, James Chang “conceived the plot to steal [Richtek’s] Trade Secrets and launch uPI to directly compete with Richtek when he was still working for Richtek.” (FAC, ¶ 104.) He and other former Richtek employees launched uPI “[w]ithin a short time after leaving Richtek” and lied about their reasons for leaving Richtek in order to conceal their conspiracy. (Id. at ¶ 105.) “As part of this illicit scheme, Defendants Amanda Dai and J.C. Chen stayed behind at Richtek as … corporate moles to continue to illicitly funnel Richtek Business and Technical Trade Secrets … to other Former Richtek Employees who were already working at or for uPI ….” (Id. at ¶ 106.) “With full knowledge,” uPI “orchestrated and participated in the scheme to facilitate the Former Richtek Employees’ misappropriation of [Richtek’s] Trade Secrets and to conceal the Former Richtek Employee’s actions from Richtek for an extended period of time.” (Id. at ¶ 116.)

These allegations demonstrate that uTI is closely related, not only to the former Richtek employees, but to their agreement with Richtek to “bear special confidentiality responsibility” for any confidential Richtek documents and “not to use any research or marketing secret of [Richtek]” after leaving its employment. (See Decl. of Alali Dagogo-Jack ISO Mot., Ex. B, “Employment Commitment Letter,” sections IV and VIII.) Richtek alleges that uTI was formed for the very purpose of competing with Richtek using trade secrets misappropriated by its former and current employees. Consequently, uTI like the employees, is entitled to hold Richtek to its agreement to litigate trade secret misappropriation claims in Taiwan. (See Lu v. Dryclean-U.S.A. of California, Inc. (1992) 11 Cal.App.4th 1490, 1494 [forum selection clause was enforceable by non-signatory defendants “alleged to have participated in the fraudulent representations which induced plaintiffs to enter into the Agreement”; “[t]o hold otherwise would be to permit a plaintiff to sidestep a valid forum selection clause simply by naming a closely related party who did not sign the clause as a defendant”]; Bugna v. Fike (2000) 80 Cal.App.4th 229, 235 [forum selection clause was enforceable by non-signatory defendants where “the heart of the complaint is that [the signatory defendant] conspired with respondents” to profit from the unconscionable agreement], italics original; cf. Bancomer, S. A. v. Superior Court, supra, 44 Cal.App.4th at p. 1460 [non-signatory bank could not enforce forum selection clause where “[t]here is no evidence of any intertwining business arrangement”: “The bank, it is alleged, acted alone. There were no assertions of fraudulent conduct by any other person or entity.”]; Berclain America Latina v. Baan Co. (1999) 74 Cal.App.4th 401, 408 [parent company could not enforce forum selection clause contained in contract between its subsidiary and plaintiff where parent did not acquire subsidiary until several years after the contract was executed—but “if [parent] had owned [subsidiary] at the time it entered into the agreement with [plaintiff] and if [parent] had been involved in that transaction, then under Lu … it would likely be appropriate” to allow the parent to enforce the clause].)

In a footnote to its opposition brief, Richtek requests leave to file a second amended complaint removing unspecified allegations concerning the individual defendants, which it contends are no longer necessary to the complaint now that the individual defendants have been dismissed. The Court will not address the merits of this request, which must be raised via a noticed motion, at this time. (See Leader v. Health Industries of America, Inc. (2001) 89 Cal.App.4th 603, 613.) It notes, however, that any amendment would be subject to the sham pleading doctrine. (See Deveny v. Entropin, Inc. (2006) 139 Cal.App.4th 408, 425–426 [allegations rendering a pleading vulnerable to attack cannot simply be omitted without explanation in an amended pleading].)

C. Remaining Issues

As urged by uPI, the Court of Appeal has already expressly determined that the forum selection provision at issue is a mandatory provision that binds Richtek as well as its employees. (See Richtek USA, Inc. v. uPI Semiconductor Corporation, supra, 242 Cal.App.4th at pp. 661-662.) In addition, it necessarily found that the provision encompasses not only claims for breach of Richtek’s employment agreement, but related claims for trade secret misappropriation—which are the only claims asserted in this action. These findings are the law of the case. (See Stock v. Meek (1952) 114 Cal.App.2d 584, 586 [“Where questions presented on a subsequent appeal were necessarily involved in a former appeal, and the conclusion arrived at on the former appeal could not have been reached without expressly or impliedly deciding the question subsequently presented, the decision on the former appeal is the law of the case ….”].)

Given that the forum selection provision is mandatory, the traditional forum non conveniens factors (whether the designated forum is a suitable alternative forum and whether the balancing of various private and public interest factors favors retaining the action in California) are not considered. (See Verdugo v. Alliantgroup, L.P. (2015) 237 Cal.App.4th 141, 147, fn.2.) To avoid enforcement of such a provision, the plaintiff bears a “heavy burden” to show that enforcement would be wholly “unreasonable under the circumstances of the case.” (Wimsatt v. Beverly Hills Weight etc. Internat., Inc. (1995) 32 Cal.App.4th 1511, 1523.) Richtek, which raises only the waiver and standing arguments that have already been addressed, does not meet that burden here.

uPI’s motion to dismiss pursuant to the forum selection clause is accordingly GRANTED.

III. Motion to Dismiss Pursuant to Forum Non Conveniens

In light of the ruling above, uPI’s alternative motion to dismiss on the ground of forum non conveniens is MOOT.