Case Name: Roy Wilder v. DealerCMO, Inc. et al.
Case No.: 18-CV-327242

Currently before the Court are the demurrer and the motion to strike by plaintiff and cross-defendant Roy Wilder (“Wilder”).

Factual and Procedural Background

This wage and hour action arises out of an employment dispute between Wilder and his former employer, defendant and cross-complainant DealerCMO, Inc. (“DealerCMO”). Wilder filed the underlying complaint against DealerCMO, alleging causes of action for: (1) unpaid wages – failure to pay commissions; (2) unlawful wage deductions; (3) breach of contract; (4) breach of implied covenant of good faith and fair dealing; (5) failure to reimburse an employee for business expenses; (6) unfair business practices; (7) waiting time penalties; and (8) failure to provide accurate wage statements.

Thereafter, DealerCMO filed the operative first amended cross-complaint (“FACC”) against Wilder.

According to the allegations of the FACC, DealerCMO hired Wilder as a Senior Results Manager in or around January 2013. (FACC, ¶ 4.) As part of the hiring process, Wilder signed a confidentiality agreement, in which he agreed to hold DealerCMO’s proprietary information, technical data, trade secrets, marketing plans, customer information, and customer lists “in strict confidence only to be used for [DealerCMO’s] benefit.” (Id. at ¶¶ 4 & 5.)

While Wilder was employed with DealerCMO, he allegedly “diverted DealerCMO customers and/or business away to direct competitors of DealerCMO” in breach of the confidentiality agreement and his duty of loyalty to DealerCMO. (FACC, ¶ 6.) For example, in or about July 2017, Wilder referred a DealerCMO customer to Ahsan Charania, the principal of Lead Foot Digital LLC, a direct competitor of DealerCMO. (Id. at ¶ 7.) Additionally, in August 2017, Wilder diverted customers and/or business away from DealerCMO to DropIn Auto, a direct competitor of DealerCMO. (Id. at ¶ 8.)

Furthermore, “while working for DealerCMO, Wilder also began simultaneously developing a competing business named Auto Edge Marketing LLC” and he used confidential and trade secret information from DealerCMO “to solicit and divert business away from DealerCMO to his own company. (FACC, ¶ 10.) For example, in September 2017, Wilder “forwarded DealerCMO’s confidential marketing plan and proposal directly to a DealerCMO customer without authorization with the goal of obtaining this DealerCMO customer for Auto Edge Marketing LLC.” (Id. at ¶ 13.)
DealerCMO terminated Wilder’s employment on September 19, 2017. (FACC, ¶ 15.) Wilder destroyed all data and information on his company laptop before returning it to DealerCMO in violation of his confidentiality agreement. (Ibid.)

Based on the foregoing allegations, DealerCMO alleges the following causes of action against Wilder: (1) breach of duty of loyalty; (2) unfair competition; (3) violation of the California Uniform Trade Secrets Act (“CUTSA”); (4) breach of contract; and (5) violation of Penal Code section 502.

On February 4, 2019, Wilder filed the instant demurrer and motion to strike. DealerCMO filed papers in opposition to the matters on May 22, 2019. On May 29, 2019, Wilder filed reply papers.

Discussion

I. Demurrer

Wilder demurs to each and every cause of action of the FACC on the grounds of uncertainty and failure to allege facts sufficient to constitute a cause of action. (Code Civ. Proc., § 430.10, subds. (e) & (f).)

A. Legal Standard

The function of a demurrer is to test the legal sufficiency of a pleading. (Trs. Of Capital Wholesale Elec. Etc. Fund v. Shearson Lehman Bros. (1990) 221 Cal.App.3d 617, 621.) Consequently, “ ‘[a] demurrer reaches only to the contents of the pleading and such matters as may be considered under the doctrine of judicial notice’ [citation].” (Hilltop Properties, Inc. v. State (1965) 233 Cal.App.2d 349, 353; see also Code Civ. Proc., § 430.30, subd. (a).) “ ‘It is not the ordinary function of a demurrer to test the truth of the … allegations [in the challenged pleading] or the accuracy with which [the plaintiff] describes the defendant’s conduct. … .’ [Citation.] Thus, … ‘the facts alleged in the pleading are deemed to be true, however improbable they may be. [Citation.]’ [Citations.]” (Align Technology, Inc. v. Tran (2009) 179 Cal.App.4th 949, 958.)

B. Uncertainty

Wilder demurs to each and every cause of action of the FACC on the ground of uncertainty.

“[D]emurrers for uncertainty are disfavored and are granted only if the pleading is so incomprehensible that a defendant cannot reasonably respond.” (Lickiss v. Financial Industry Reg. Authority (2012) 208 Cal.App.4th 1125, 1135; Khoury v. Maly’s of Cal., Inc.(1993) 14 Cal.App.4th 612, 616 [“A demurrer for uncertainty is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures.”].)
Wilder’s memorandum of points and authorities is devoid of any argument identifying a specific allegation in the complaint that he contends is uncertain, ambiguous, and/or unintelligible. (See Fenton v. Groveland Community Services Dist. (1982) 135 Cal.App.3d 797, 809 [“failure to specify the uncertain aspects of a complaint will defeat a demurrer based on the grounds of uncertainty”] overruled on other grounds by Katzberg v. Regents of University of California (2002) 29 Cal.4th 300, 328, fn. 30.) Furthermore, Wilder’s arguments pertain to DealerCMO’s purported failure to allege sufficient facts to state a claim. It appears that Wilder misunderstands the nature of uncertainty as a ground for demurrer. The law is settled that “[a] special demurrer for uncertainty is not intended to reach the failure to incorporate sufficient facts in the pleading but is directed at the uncertainty existing in the allegations already made.” (Butler v. Sequiera (1950) 100 Cal.App.2d 143, 145-146.)

Accordingly, Wilder’s demurrer to each and every cause of action on the ground of uncertainty is OVERRULED.

C. Failure to State a Claim

1. General Argument Regarding Injunctive Relief

As an initial matter, Wilder contends that the first through fourth causes of action fail to allege sufficient facts to support DealerCMO’s request for injunctive relief.

However, a demurrer is not the appropriate procedural mechanism by which to attack a remedy that is believed to be improper as a demurrer only tests the sufficiency of the cause of action pleaded; a demand for improper relief does not vitiate an otherwise valid cause of action. (See Venice Town Council, Inc. v. City of Los Angeles (1996) 47 Cal.App.4th 1547, 1561-1562.) To the extent that the Wilder believes a valid request for injunctive relief has not been stated, his challenge to the pleading must be brought by way of a motion to strike. (See Turman v, Turning Point of Central Calif., Inc. (2010) 191 Cal.App.4th 53, 63.)

2. Breach of Duty of Loyalty

Wilder argues that the first cause of action for breach of duty of loyalty fails to state a claim because DealerCMO did not identify any conduct by him that breached any duty of loyalty. Wilder further argues that “[t]o the extent [he] was seeking other employment or making preparations to compete with DealerCMO before resigning, such conduct is not actionable.” (Mem. Ps. & As., p. 5:24-27.)

Wilder’s arguments lack merit. In the first cause of action, DealerCMO alleges that Wilder breached his duty of loyalty to DealerCMO by soliciting and diverting business to his competing company and to other DealerCMO competitors by utilizing confidential and trade secret information. (FACC, ¶ 19.) Furthermore, the FACC sets forth several specific examples of instances where Wilder allegedly solicited and diverted business away from DealerCMO by using confidential and/or trade secret information. (Id. at ¶¶ 6-13.) Thus, DealerCMO has adequately identified Wilder’s alleged conduct that breached the duty of loyalty.

Furthermore, Wilder does not cite any legal authority, and the Court is aware of none, providing that his alleged conduct cannot constitute a breach of duty of loyalty, as a matter of law, simply because he may have engaged in the alleged conduct while he was seeking other employment or making preparations to compete with DealerCMO. (See Badie v. Bank of America (1998) 67 Cal.App.4th 779, 784-785 (Badie) [“When [a party] fails to raise a point, or asserts it but fails to support it with reasoned argument and citations to authority, we treat the point as waived.”]; see also Schaeffer Land Trust v. San Jose City Council (1989) 215 Cal.App.3d 612, 619, fn. 2 (Schaeffer) [“[A] point which is merely suggested by a party’s counsel, with no supporting argument or authority, is deemed to be without foundation and requires no discussion.”].)

For these reasons, the demurrer to the first cause of action is OVERRULED.

3. Unfair Competition

Wilder contends that the second cause of action for unfair competition fails to state a claim because DealerCMO does not identify the conduct that he allegedly engaged in constituting unfair competition. He further contends that DealerCMO does not allege sufficient facts to establish the economic injury necessary to confer standing under Business and Professions Code section 17200 (the “UCL”).

Wilder’s arguments lack merit. In the second cause of action, DealerCMO alleges that Wilder engaged in unfair competition when he utilized its confidential and trade secret information to solicit and divert business to his competing company and to other DealerCMO competitors. (FACC, ¶ 23.) Furthermore, the FACC sets forth several specific examples of instances where Wilder allegedly solicited and diverted business away from DealerCMO by using confidential and/or trade secret information. (Id. at ¶¶ 6-13.) Thus, DealerCMO has adequately identified Wilder’s alleged conduct that constituted unfair competition.

With respect to the issue of standing, “[a] private party has standing to prosecute a UCL action unless he or she ‘has suffered injury in fact and has lost money or property as a result of the unfair competition.’ [Citations.]” (Law Offices of Mathew Higbee v. Expungement Assistance Services (2013) 214 Cal.App.4th 544, 555-556; Clayworth v. Pfizer, Inc. (2010) 49 Cal.4th 758, 788.) “There are innumerable ways in which economic injury from unfair competition may be shown. A plaintiff may (1) surrender in a transaction more, or acquire in a transaction less, than he or she otherwise would have; (2) have a present or future property interest diminished; (3) be deprived of money or property to which he or she has a cognizable claim; or (4) be required to enter into a transaction, costing money or property, that would otherwise have been unnecessary.” (Kwikset Corp. v. Super. Ct. (2011) 51 Cal.4th 310, 323.)

Here, DealerCMO alleges that it suffered damages when Wilder solicited and diverted business away from it. (FACC, ¶¶ 23-24.) Wilder does not cite any legal authority whatsoever suggesting that this lost business cannot, as a matter of law, constitute an economic injury sufficient to create standing under the UCL. (See Badie, supra, 67 Cal.App.4th at pp. 784-785 [“When [a party] fails to raise a point, or asserts it but fails to support it with reasoned argument and citations to authority, we treat the point as waived.”]; see also Schaeffer, supra, 215 Cal.App.3d at p. 619, fn. 2 [“[A] point which is merely suggested by a party’s counsel, with no supporting argument or authority, is deemed to be without foundation and requires no discussion.”].)

Accordingly, the demurrer to the second cause of action is OVERRULED.

4. Violation of CUTSA and Breach of Contract

Wilder states in his notice of demurrer and demurrer that he is demurring to the third cause of action for violation of CUTSA and the fourth cause of action for breach of contract on the ground of failure to allege facts sufficient to constitute a cause of action.

However, Wilder does not present any argument in his memorandum of points and authorities with respect to the third and fourth causes of action apart from his general contention regarding DealerCMO’s request for injunctive relief, which lacks merit for the reasons explained above. Because Wilder does not provide any further argument regarding the third and fourth causes of action, his demurrer to those claims is not well-taken. (See Cal. Rules of Court, rule 3.1113(a)-(b) [providing that the absence of supporting argument in the memorandum of points and authorities may be construed as a waiver of that ground for demurrer]; see also Badie, supra, 67 Cal.App.4th at pp. 784-785 [“When [a party] fails to raise a point, or asserts it but fails to support it with reasoned argument and citations to authority, we treat the point as waived.”]; Schaeffer, supra, 215 Cal.App.3d at p. 619, fn. 2 [“[A] point which is merely suggested by a party’s counsel, with no supporting argument or authority, is deemed to be without foundation and requires no discussion.”].)

Consequently, the demurrer to the third and fourth causes of action is OVERRULED.

5. Violation of Penal Code Section 502

Wilder argues that the fifth cause of action for violation of Penal Code section 502 fails to state a claim because DealerCMO does not identify the specific property and data that he allegedly deleted from his company laptop.

Wilder’s argument is not well-taken because he does not cite any legal authority, and the Court is aware of none, providing that such specificity is required. (See Badie, supra, 67 Cal.App.4th at pp. 784-785 [“When [a party] fails to raise a point, or asserts it but fails to support it with reasoned argument and citations to authority, we treat the point as waived.”]; see also Schaeffer, supra, 215 Cal.App.3d at p. 619, fn. 2 [“[A] point which is merely suggested by a party’s counsel, with no supporting argument or authority, is deemed to be without foundation and requires no discussion.”].) Notably, a plaintiff need only plead ultimate facts, not evidentiary facts supporting such allegations. (See Quinn v. Reilly (1926) 198 Cal. 465, 468[“The appellant was not obliged to embody his proof, whatever it may amount to, in the allegations of his complaint.”]; see also McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1469-1470 [“Under California law, “[t]he rules of pleading require, with limited exceptions not applicable here, only general allegations of ultimate fact. [Citations.] The plaintiff need not plead evidentiary facts supporting the allegation of ultimate fact. [Citation.]”].)

Accordingly, the demurrer to the fifth cause of action is OVERRULED.

II. Motion to Strike

Wilder moves to strike paragraphs 21, 25, 32, and 41 of the FACC in their entirety, as well as the portion of DealerCMO’s prayer for relief seeking exemplary damages.

A. Legal Standard

Under Code of Civil Procedure section 436, a court may strike out any irrelevant, false, or improper matter inserted into any pleading or strike out all or part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court. (Code Civ. Proc., § 436.) The grounds for a motion to strike must appear on the face of the challenged pleading or from matters of which the court may take judicial notice. (Code Civ. Proc., § 437, subd. (a).) In ruling on a motion to strike, the court reads the pleading as a whole, all parts in their context, and assuming the truth of all well-pleaded allegations. (See Turman v. Turning Point of Central California, Inc. (2010) 191 Cal.App.4th 53, 63, citing Clauson v. Super. Ct. (1998) 67 Cal.App.4th 1253, 1255.)

B. Attorney Fees

Wilder moves to strike paragraphs 32 and 41 in their entirety, which request, among other things, attorney fees.

However, Wilder does not address the propriety of DealerCMO’s request for attorney fees in his memorandum of points and authorities. Rather, Wilder’s arguments focus exclusively on the issue of punitive damages. Because Wilder does not provide any argument regarding the request for attorney fees, his motion to strike those portions of paragraphs 32 and 41 requesting attorney fees is not well-taken. (See Cal. Rules of Court, rule 3.1113(a)-(b) [providing that the absence of supporting argument in the memorandum of points and authorities may be construed as a waiver of that ground for demurrer]; see also Badie, supra, 67 Cal.App.4th at pp. 784-785 [“When [a party] fails to raise a point, or asserts it but fails to support it with reasoned argument and citations to authority, we treat the point as waived.”]; Schaeffer, supra, 215 Cal.App.3d at p. 619, fn. 2 [“[A] point which is merely suggested by a party’s counsel, with no supporting argument or authority, is deemed to be without foundation and requires no discussion.”].)

Accordingly, the motion to strike paragraphs 32 and 41 of the FACC is DENIED to the extent those paragraphs request an award of attorney fees.

C. Punitive Damages

Wilder moves to strike paragraphs 21, 25, 32, and 41 of the FACC, as well as the portion of DealerCMO’s prayer for relief seeking exemplary damages, arguing that DealerCMO has not pleaded sufficient facts showing that he acted with malice, oppression, or fraud. Wilder also argues that the punitive damages sought in paragraph 25 should be stricken because punitive damages cannot be recovered in connection with a claim for unfair competition.

In opposition, DealerCMO concedes that the motion to strike is well-taken as to paragraph 25 of the FACC. DealerCMO otherwise contends that Wilder’s alleged conduct “was intended to cause injury to DealerCMO, that his conduct was carried on with a willful and conscious disregard of DealerCMO’s rights, and that … Wilder’s actions were fraudulent.” (Oppn., p. 2:1-3.)

As an initial matter, the motion is admittedly well-taken as to paragraph 25 of the FACC. Therefore, the motion to strike paragraph 25 of the FACC is GRANTED, without leave to amend.

The Court now turns to the merits of the parties’ arguments with respect to the remaining portions of the FACC.

The right to recover punitive damages requires proof of “oppression, fraud, or malice” on the part of the defendant by “clear and convincing evidence.” (Civ. Code, § 3294, subd. (a).) For pleading purposes, in order to support a prayer for punitive or exemplary damages, the complaint must allege “ultimate facts of the defendant’s oppression, fraud or malice.” (Cyrus v. Haveson (1976) 65 Cal.App.3d 306, 316-317.) Simply pleading the statutory terms “oppression, fraud or malice” is insufficient to adequately allege punitive damages, but only to the extent that the complaint pleads facts to support those allegations. (Blegen v. Super. Ct. (1986) 176 Cal.App.3d 503, 510-511.) Therefore, specific factual allegations demonstrating oppression, fraud, or malice are required. (Brousseau v. Jarrett (1977) 73 Cal.App.3d 864, 872.)

Here, malice, fraud and oppression all serve as the foundation for DealerCMO’s punitive damages requests. Under the punitive damages statute, Civil Code section 3294, “malice” is defined as conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.” (Civ. Code, § 3294, subd. (c)(1).) “Oppression” is defined as “despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person’s rights.” (Id., § 3294, subd. (c)(2).) “Despicable conduct,” in turn, has been described as conduct that is “so vile, base, contemptible, miserable, wretched or loathsome that it would be looked down upon and despised by ordinary decent people.” (Mock v. Michigan Millers Mutual Ins. Co. (1992) 4 Cal.App.4th 306, 331.) Finally, “fraud” is defined as “an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.” (Civ. Code, § 3294, subd. (c)(3).)

Here, DealerCMO does not allege that Wilder intended to cause injury DealerCMO.

Similarly, DealerCMO does not allege a claim for fraud or plead facts in the FACC showing that Wilder knowingly misrepresented, deceived, or concealed a material fact known to him with the intention of depriving DealerCMO of property or legal rights or otherwise causing injury. (See G. D. Searle & Co. v. Super. Ct. (1975) 49 Cal.App.3d 22, 29 [“Vague, conclusory allegations of fraud or falsity may not be rescued by the rule of liberal construction. [Citation.] When the plaintiff alleges an intentional wrong, a prayer for exemplary damage may be supported by pleading that the wrong was committed willfully or with a design to injure. [Citation]”].)

Furthermore, Wilder’s alleged conduct soliciting and diverting business away from DealerCMO does not amount to “despicable” conduct. (See Lackner v. North (2006) 135 Cal.App.4th 1188, 1210 (Lackner) [“The adjective ‘despicable’ connotes conduct that is ‘ “… so vile, base, contemptible, miserable, wretched or loathsome that it would be looked down upon and despised by ordinary decent people.” ’ [Citation.]”].)

Finally, DealerCMO alleges that Wilder violated Penal Code section 502 when he knowingly, and without permission, destroyed its property and data on his company laptop. (FAC, ¶¶ 37-41.) Although Wilder’s commission of a crime could possibly support an award of punitive damages (see Lackner v. North (2006) 135 Cal.App.4th 1188, 1210 [ “Punitive damages are appropriate if the defendant’s acts are reprehensible, fraudulent or in blatant violation of law or policy.”]), the facts surrounding the alleged deletion and/or destruction of information on Wilder’s company computer are not alleged with sufficient specificity to support an award of punitive damages.

Accordingly, the motion to strike paragraphs 21 32, and 41 of the FACC, as well as the portion of DealerCMO’s prayer for relief seeking exemplary damages, is GRANTED, with 10 days’ leave to amend, to the extent those portions of the FACC request punitive damages.