Dairy, LLC v. Milk Moovement, Inc.
| Decision Date | 13 April 2022 |
| Docket Number | 2:21-cv-02233 WBS AC |
| Parties | DAIRY, LLC, a Delaware Limited Liability Company, Plaintiff, v. MILK MOOVEMENT, INC., a foreign Corporation, and MILK MOOVEMENT LLC, a Delaware Limited Liability Company, Defendants. |
| Court | U.S. District Court — Eastern District of California |
MEMORANDUM AND ORDER RE: DEFENDANTS' MOTION TO DISMISS
Plaintiff Dairy, LLC filed this action against defendants Milk Moovement, Inc. and Milk Moovement, LLC alleging trade secret misappropriation under the Defend Trade Secrets Act (“DTSA”), 18 U.S.C. § 1836, and the California Uniform Trade Secrets Act (“CUTSA”) California Civil Code § 3426.1, and intentional interference with contractual relations. Defendants move to dismiss all claims of the FAC. (Docket No. 55.)
Plaintiff provides software to clients, including milk processors and dairy cooperatives, in the United States dairy industry. (FAC ¶¶ 2, 16.) Part of plaintiff's software, called the “producer payroll application, ” allows users to comply with Federal Milk Marketing Orders that regulate minimum milk prices paid to dairy producers. (Id. ¶¶ 3-4.) Plaintiff's software also generates reports to enable clients to determine whether to participate in the federal “pool” which sets a minimum price for different classes of milk. (Id. ¶¶ 18-22.)
California Dairies Inc. (“CDI”) was one of plaintiff's customers commencing in 2014 and used plaintiff's producer payroll application. (Id. ¶¶ 32-33, 36.) Defendants provide cloud-based software to the dairy industry. (Id. ¶ 5.) Plaintiff alleges that in April 2021, defendants and CDI engaged in discussions, resulting in CDI entering into a software and services agreement with defendants in September 2021. (Id. ¶¶ 37, 40-41.) CDI then gave notice to plaintiff that it was terminating all software subscriptions with plaintiff as of February 1, 2022. (Id. ¶ 41.)
Plaintiff alleges that shortly thereafter, CDI and defendants had a call in which they discussed “confidential and trade secret information regarding [plaintiff's] producer payroll application and reporting capabilities.” (Id. ¶ 42.) After the call, employees at CDI allegedly shared with defendants fifteen reports that were generated from plaintiff's software. (Id.) Plaintiff alleges that the user agreement it had with CDI restricted CDI from sharing such information. (Id. ¶¶ 57, 66.)
The court previously denied plaintiff's requests for a temporary restraining order and preliminary injunction. (Docket Nos. 17, 59.)[1] The court now considers defendants' motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6).
On a Rule 12(b)(6) motion, the inquiry before the court is whether, accepting the allegations in the complaint as true and drawing all reasonable inferences in the plaintiff's favor, the plaintiff has stated a claim to relief that is plausible on its face. See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). “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. “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id.
The court will analyze the DTSA and CUTSA claims together as the “elements are substantially similar.” See InteliClear, LLC v. ETC Global Holdings, Inc., 978 F.3d 653, 657 (9th Cir. 2020). Defendants argue that the FAC fails to: (1) identify plaintiff's trade secrets with sufficient particularity; (2) allege facts establishing reasonable measures to maintain secrecy; and (3) allege facts establishing misappropriation. (Def.'s Mot. at 2.) The court analyzes each argument below.
Plaintiff is required to “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 . . . skilled in the trade.” Imax Corp. v. Cinema Tech., Inc., 152 F.3d 1161, 1164-65 (9th Cir. 1998) (quotations and citation omitted).
The FAC includes a section titled “Description of Dairy's Trade Secret.” (See FAC at 5.) Within this section, the FAC first outlines the federal regulations that plaintiff's software attempts to comply with through its “producer payroll application.” (See id. ¶¶ 15-22.) Next, the FAC lists the features of the “producer payroll application” that help clients comply with the federal regulations and make decisions about whether to “pool” their milk purchases. (See id. ¶ 22.) Then, the FAC explicitly states the alleged trade secret that is within the “producer payroll application.” The FAC states: “Dairy's software includes and implements a methodology for handling FMMO pooling that is unique in the industry and is Dairy's trade secret.” (Id. ¶ 23.)
Further, the FAC summarizes the “Nature of the Action” at the beginning of the FAC and identifies as the alleged trade secret “[t]he elements of Dairy's producer payroll application that enable Dairy's clients to easily and efficiently make decisions about what milk to pool, designate milk for pooling, and generate accurate reports and invoices to comply with [federal regulations].” (Id. ¶ 4.) The FAC repeats the identification of this alleged trade secret when describing “count one” and “count two.”
These repeated descriptions of the alleged trade secret all sufficiently “identify at least one trade secret with particularity” and “permit[] the defendant[s] to ascertain at least the boundaries within which the secret lies.” InteliClear, 978 F.3d at 659; Alta Devices, Inc. v. LG Elecs., Inc., 343 F.Supp.3d 868, 881 (N.D. Cal. 2018).
The FAC does more than describe the trade secret in “broad, categorial terms.” See Albert's Organics, Inc. v. Holzman, 445 F.Supp.3d 463, 472 (N.D. Cal. 2020) ( that trade secrets were not pled with sufficient particularity because categories such as “supplier information, pricing, [and] financing” were too broad). The FAC does not broadly state that plaintiff's software is its trade secret, but rather the “description pertains to a single, distinct system and the components therein, ” specifically the pooling methodology within the “producer payroll application.” See Inteliclear LLC v. ETC Global Holdings, No. 2:18-v-10342, 2019 WL 3000648, at *2 (C.D. Cal. Apr. 5, 2019) (trade secret was defined with sufficient particularity as the “unique design and concepts and the unique software, formulas, processes, programs . . . by which the system components interrelate and process data”); (FAC ¶¶ 23, 55, 65.)
Defendants argue the alleged trade secret “lacks boundaries” because the FAC states that the trade secret information is “including, but not limited to” the pooling methodology and the pooling methodology is “amongst Dairy's trade secrets.” (See FAC ¶¶ 4, 55, 65.) However, that language is used differently here than the hedging language was used in the complaint in Cutera, Inc. v. Lutronic Aesthetics, Inc., No. 2:20-cv-00235-KJM-DB, 2020 WL 4937129, at *5 (E.D. Cal. Aug. 24, 2020). In Cutera, the complaint included “a non-exhaustive list of trade secrets” and alleged the defendant had misappropriated “any number of undefined trade secrets.” Id. at *5. Here, the FAC specifically identifies the pooling methodology as a trade secret and does not include a “non-exhaustive list.” Further, at the pleading stage, “it is not fatal” that plaintiff's “hedging language left open the possibility of expanding its identifications later.” See InteliClear, 978 F.3d at 659.[2]
Zoom Imaging Solutions, Inc. v. Roe, No. 2:19-cv-01544-WBS-KJN, 2019 WL 658 WL 5862594 (E.D. Cal. Nov. 8, 2019), cited by defendants, is distinguishable, in that this court in that case granted the motion to dismiss because the complaint did not “distinguish between the [Confidential [i]nformation and the trade secrets.” See id. at * 5. Specifically, the complaint there simply alleged that the trade secrets were part of the confidential information categories the complaint listed. See id. at *4. In contrast, the FAC here identifies the pooling methodology as the alleged trade secret, and therefore, distinguishes between the confidential information and the trade secret.
For these reasons, the court concludes that the FAC sufficiently identifies the trade secret with particularity without spelling “out the details of the trade secret” as doing so “would mean that the complainant would have to destroy the very thing for which [it seeks] protection.” See TMX Funding, Inc. v. Impero Techs. Inc., No. C 10-00202 JF (PVT), 2010 WL 2509979, at *3 (N.D. Cal. June 17, 2010). Defendants can ascertain that the trade secret is the pooling methodology used in the “producer payroll application” within plaintiff's software.
The FAC spends three pages discussing numerous ways in which plaintiff attempts to protect its trade secrets, including the producer payroll application containing the pooling methodology. (FAC ¶¶ 26-31 ().) These allegations, accepted as true, are sufficient to meet the plausibility standard required at the pleading stage. See Ashcroft, 556 U.S. at 678. Defendants' arguments on this element, including their interpretation of plaintiff's user agreement, are better suited for a later stage of this action, as t...
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