Lynwood Invs. CY v. Konovalov
| Decision Date | 16 August 2022 |
| Docket Number | 20-cv-03778-MMC |
| Parties | LYNWOOD INVESTMENTS CY LIMITED, Plaintiff, v. MAXIM KONOVALOV, et al., Defendants. |
| Court | U.S. District Court — Northern District of California |
Before the Court is defendants Maxim Konovalov (“Konovalov”), Igor Sysoev (“Sysoev”), Andrey Alexeev (“Alexeev”), Maxim Dounin (“Dounin”) Gleb Smirnoff (“Smirnoff”), Angus Robertson (“Robertson”), NGINX, Inc. (BVI) (“NGINX BVI”), NGINX Software, Inc., BV NGINX, LLC (“BV NGINX”), Runa Capital, Inc. (“Runa Capital”), E.venture Capital Partners II, LLC ( ), and F5 Networks, Inc. (“F5”)'s Consolidated Motion, filed May 27 2021, “to Dismiss Plaintiff's Amended Complaint” (“AC”). Plaintiff, Lynwood Investments CY Limited (“Lynwood”), has filed opposition, to which defendants have replied. The Court having considered the papers filed in support of and in opposition to the motion, rules as follows.
Lynwood alleges it is a “Cyprus limited liability company . . . prosecuting this action in its capacity as the assignee of all rights and interests” of Rambler Internet Holding LLC (“Rambler”), “one of the largest media companies and web portals in Russia.” (See AC ¶¶ 73-74, 97.) Lynwood further alleges Sysoev was “a programming talent at Rambler” who, in order to “solve Rambler-specific issues related to handling large volumes of web server traffic,” developed “the popular web server software[1] that has become known worldwide as Open Source NGINX.” (See AC ¶¶ 23-24.) In particular, Lynwood alleges “Sysoev wrote his first line of NGINX-related software code” on October 23, 2001 (see AC ¶ 23), and then spent “nine years of his Rambler employment working primarily on Open Source NGINX” (see AC ¶ 195).
According to Lynwood, although “Sysoev first publicly released . . . Open Source NGINX in 2004, without authorization from Rambler,” Rambler “made a business decision to permit Sysoev to continue releasing Open Source NGINX . . . because such releases highlighted the technical achievements of Rambler and its employee Sysoev, which inured to Rambler's benefit for attracting top software programmers.” (See AC ¶¶ 34, 210.) Lynwood further alleges Rambler's Chief Technology Officer (“CTO”), Konovalov, “repeatedly misrepresented to [Rambler] that Open Source NGINX had no independent commercial value or prospects for monetization” (see AC ¶ 17) and “that its only use for Rambler was to solve Rambler's internal technical issues . . . and to burnish Rambler's reputation as a worldwide leader in technology innovation” (see AC ¶ 16). As a result, Lynwood alleges, “Rambler never undertook efforts to monetize or commercialize Open Source NGINX” (see AC ¶ 319) and “did not object to Konovalov and Sysoev earning an income off of Open Source NGINX” when they later separated from Rambler in 2011 (see AC ¶ 324).
Allegedly unbeknownst to Rambler, however, Sysoev and eight other Rambler software programmers, while “work[ing] together in a tight-knit department devoted to product development within Rambler known as the Network Operation Center (‘NOC') that was ring-fenced from the rest of the company” and overseen by Konovalov, along with Popov, Rambler's Deputy Chief Technology Officer, and Smirnoff, Head of the NOC Department (see AC ¶¶ 10-11), were “secretly developing] proprietary, commercial versions of NGINX software code,” which they called “NGINX Plus” (see AC ¶¶ 15, 215).
Lynwood alleges that, at some point in time, Konovalov, Sysoev, and Smirnoff (collectively, the “Disloyal Employees”), along with their “third-party acquaintances” Alexeev and Dounin (all five, collectively, the “Team”) (see AC ¶ 99) “agreed that together they would start their own company in San Francisco, California[,] to commercialize Open Source NGINX by commercializing NGINX Plus and other proprietary Open Source NGINX extensions, and then achieve their multimillion dollar ‘exit' or ‘payday' by selling the entire NGINX Enterprise[2] to a large U.S. technology company” (see AC ¶ 214). Lynwood alleges that, in connection therewith, the Disloyal Employees “orchestrated their resignations from Rambler” (see AC ¶¶ 25, 160), and that, “by early April, 2011, when Konovalov and Sysoev were still employed by Rambler,” the Team secured “venture funding” from Runa Capital and E. Ventures (see AC ¶ 20), then formed “NGINX Software, Inc. on May 4, 2011[,] NGINX BVI on July 6, 2011[,] and NGINX DE in August 2011” (see AC ¶ 550), and thereafter “achieved the ultimate object of their conspiracy when they sold Rambler's NGINX Enterprise to F5 through [a] [m]erger [with NGINX BVI] for $670 million” (see AC ¶ 568), which merger agreement “closed on May 8, 2019” (see AC ¶ 217). Lynwood alleges Robertson, who had “joined NGINX [Software, Inc.] as CEO in 2012” (see AC ¶ 84), “joined F5 as a result of the merger between F5 and NGINX BVI” (hereinafter, “2019 Merger”) (see AC ¶ 365).
Based on the above allegations, Lynwood in its AC, asserts twenty-five claims, sixteen of which have been stayed by prior order,[3] leaving the following nine claims subject to challenge by the instant motion: (1) First Claim for Relief, titled “Breach of Employment Obligations Owed by Konovalov to Rambler,” (2) Second Claim for Relief, titled “Breach of Employment Obligations Owed by Sysoev to Rambler,” (3) Fourth Claim for Relief, titled “Breach of Konovalov's Duty to Act Fairly and Honestly With Rambler,” (4) Seventh Claim for Relief, titled (5) Eighth Claim for Relief, titled “Aiding and Abetting by F5 of the Disloyal Employees' Fraud and Breaches of Their Duties of Honesty and Loyalty to Rambler,” (6) Ninth Claim for Relief, titled “Tortious Interference with Contract Against Konovalov, Robertson, NGINX Software, Inc., NGINX BVI, and NGINX DE,” (7) Twelfth Claim for Relief, titled “Tortious Interference with Prospective Business Advantage Against All Defendants,” (8) Thirteenth Claim for Relief, titled “Fraud Against the Disloyal Employees, NGINX Software, Inc., NGINX DE and NGINX BVI,” and (9) Fourteenth Claim for Relief, titled “Berne Convention for the Protection of Literary and Artistic Works and the Copyright Act (17 U.S.C. § 101, et seq.) based on Direct Copyright Infringement Against Defendants Konovalov, Sysoev, Alexeev, Dounin, Smirnoff, NGINX BVI, NGINX Software, Inc., NGINX DE, Robertson and F5.”
Dismissal under Rule 12(b)(6) of the Federal Rules of Civil Procedure “can be based on the lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory.” See Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990). Rule 8(a)(2), however, “requires only ‘a short and plain statement of the claim showing that the pleader is entitled to relief.'” See Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Fed.R.Civ.P. 8(a)(2)). Consequently, “a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations.” See id. Nonetheless, “a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” See id. (internal quotation, citation, and alteration omitted).
In analyzing a motion to dismiss, a district court must accept as true all material allegations in the complaint and construe them in the light most favorable to the nonmoving party. See NL Indus., Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir. 1986). “To survive a motion to dismiss, a complaint must contain sufficient factual material, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). “Factual allegations must be enough to raise a right to relief above the speculative level[.]” Twombly, 550 U.S. at 555.
Courts “are not bound to accept as true a legal conclusion couched as a factual allegation.” See Iqbal, 556 U.S. at 678 (internal quotation and citation omitted).
By the instant motion, defendants seek an order dismissing, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, each of the nine non-stayed claims. In support thereof, defendants argue “Lynwood's amended claims remain barred by the applicable statutes of limitations,” “still fail to satisfy Rule 9(b)'s heightened pleading requirements,” and “also fail[] to state a claim against defendants.” (See Defs.' Mot. at 23.) As set forth below, the Court finds Lynwood's claims are either barred by the applicable statutes of limitations or fail to state a claim, or both, and does not address herein defendants' remaining argument.
“A plaintiff must bring a cause of action within the limitations period after accrual of the cause of action.” See River Colony Ests. Gen. P'ship v. Bayview Fin. Trading Grp., Inc., 287 F.Supp.2d 1213, 1221 (S.D. Cal. 2003). Generally, a cause of action accrues at “the time when, under the substantive law, the wrongful act is done, or the wrongful result occurs, and the consequent liability arises.” See Norgart v. Upjohn Co., 21 Cal.4th 383, 397 (1999) (internal quotation, citation, and alteration omitted). In other words, the statute of limitations typically begins to run “when the cause of action is complete with all of its elements.” See id.
“A claim may be dismissed under Rule 12(b)(6) on the ground that it is barred by the applicable statute of limitations only when the running of ...
To continue reading
Request your trial