Magic Leap, Inc. v. Chi Xu
| Decision Date | 17 June 2020 |
| Docket Number | Case No. 19-CV-03445-LHK |
| Court | U.S. District Court — Northern District of California |
| Parties | MAGIC LEAP, INC., Plaintiff, v. CHI XU and HANGZHOU TAIRUO TECHNOLOGY CO., LTD., Defendants. |
Defendants bring the instant motion to dismiss Plaintiff's Complaint, ECF No. 1 ("Compl."), under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim and under Federal Rule of Civil Procedure 12(b)(2) for lack of personal jurisdiction. ECF No. 22. Having considered the submissions of the parties, the relevant law, and the record in this case, the Court GRANTS Defendants' motion to dismiss for failure to state a claim.
Plaintiff Magic Leap, Inc. ("Magic Leap") is a Delaware corporation with its principal place of business in Plantation, Florida. Compl. ¶ 4. Plaintiff specializes in the field of "spatial computing, which encompasses augmented, virtual and hybrid (or mixed) reality technology." Id. ¶ 2. Defendant Chi Xu ("Xu") resides in Beijing, China. Id. ¶ 5. Defendant Hangzhou Tairuo Technology Co., Ltd. (d/b/a "Nreal"), is a Chinese business entity established in or about early 2017. Id. ¶ 6.
Plaintiff alleges that Xu "formerly worked for Magic Leap in its Sunnyvale, California facilities from July 27, 2015 until August 15, 2016." Id. ¶ 5. As a condition of his employment, Xu signed a Proprietary Information and Inventions Agreement (the "PIIA"), which "contains a broad prohibition against the use or disclosure of the defined confidential and proprietary information both during and after Mr. Xu's employment" with Plaintiff. Id. ¶¶ 10-11; see id., Ex. A ("PIIA"). Plaintiff further alleges that, during Xu's employment with Plaintiff, Xu "had access to much of Magic Leap's Confidential Information spanning all phases of its research and development efforts." Id. ¶ 12.
In August 2016, Xu ended his employment with Plaintiff. Id. ¶ 19. In 2017, Xu subsequently formed Nreal, a company that quickly released a competing prototype of "lightweight, ergonomically designed, mixed reality glasses," called the Nreal Light. Id. ¶ 3, 17. Plaintiff alleges that the Nreal Light is "strikingly similar to confidential Magic Leap designs and confidential and proprietary information to which [Xu] had access as an employee." Id. ¶ 3.
Accordingly, on June 17, 2019, Plaintiff filed suit in this Court and named Xu and Nreal as Defendants. See Compl. Plaintiff brings four claims: (1) breach of contract, which is alleged against Xu, Compl. ¶¶ 35-42; (2) interference with contract, which is alleged against Nreal, Compl. ¶¶ 43-49; (3) constructive fraud, which is alleged against both Defendants, Compl. ¶¶ 50-57; and (4) unfair competition in violation of California Business and Professions Code section 17200, et seq., against both Defendants, Compl. ¶¶ 58-61.
On December 12, 2019, Defendants filed the instant motion to dismiss the Complaint. ECF No. 22 ("Mot."). On January 30, 2020, Plaintiff filed an opposition. ECF No. 37 ("Opp'n"). On February 27, 2020, Defendants filed a reply. ECF No. 39 ("Reply").
Finally, in support of Defendant's motion to dismiss, Defendants submitted a declaration from Xu. ECF No. 22-1 ("Xu Decl."). Plaintiff objects to "20 out of the 25 paragraphs" in the declaration, which Plaintiff argues do not contain any jurisdictionally relevant facts and insteadimpermissibly rebuts Plaintiff's factual allegations from the Complaint. Opp'n at 5. Although the Court does not rely upon the Xu Declaration in this Order, the Court agrees that much of the information contained in the declaration may not be considered at this procedural posture. See Khoja v. Orexigen Therapeutics, Inc., 899 F.3d 988, 998 (9th Cir. 2018) (). Accordingly, Plaintiff's objection as to paragraphs 2 through 15 and 21 through 25 of the Xu Declaration is SUSTAINED.
Rule 8(a) of the Federal Rules of Civil Procedure requires a complaint to include "a short and plain statement of the claim showing that the pleader is entitled to relief." A complaint that fails to meet this standard may be dismissed pursuant to Federal Rule of Civil Procedure 12(b)(6). Rule 8(a) requires a plaintiff to plead "enough facts to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). "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." 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. (internal quotation marks omitted). For purposes of ruling on a Rule 12(b)(6) motion, the Court "accept[s] factual allegations in the complaint as true and construe[s] the pleadings in the light most favorable to the nonmoving party." Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008).
The Court, however, need not accept as true allegations contradicted by judicially noticeable facts, see Shwarz v. United States, 234 F.3d 428, 435 (9th Cir. 2000), and it "may look beyond the plaintiff's complaint to matters of public record" without converting the Rule 12(b)(6) motion into a motion for summary judgment, Shaw v. Hahn, 56 F.3d 1128, 1129 n.1 (9th Cir. 1995). Nor must the Court "assume the truth of legal conclusions merely because they are cast in the form of factual allegations." Fayer v. Vaughn, 649 F.3d 1061, 1064 (9th Cir. 2011) (percuriam) (quoting W. Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir. 1981)). Mere "conclusory allegations of law and unwarranted inferences are insufficient to defeat a motion to dismiss." Adams v. Johnson, 355 F.3d 1179, 1183 (9th Cir. 2004).
In a motion challenging personal jurisdiction under Federal Rule of Civil Procedure 12(b)(2), the plaintiff, as the party seeking to invoke the jurisdiction of the federal court, has the burden of establishing that jurisdiction exists. See In re Boon Global Ltd., 923 F.3d 643, 650 (9th Cir. 2019). "Where, as here, the defendant's motion is based on written materials rather than an evidentiary hearing, 'the plaintiff need only make a prima facie showing of jurisdictional facts to withstand the motion to dismiss.'" Ranza v. Nike, Inc., 793 F.3d 1059, 1068 (9th Cir. 2015) (quoting CollegeSource, Inc. v. AcademyOne, Inc., 653 F.3d 1066, 1073 (9th Cir. 2011)).
However, this standard "is not toothless," and the party asserting jurisdiction "cannot simply rest on the bare allegations of its complaint." In re Boon Global Ltd., 923 F.3d at 650 (quoting Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 800 (9th Cir. 2004)). Thus, courts may consider declarations and other evidence outside the pleadings to determine whether it has personal jurisdiction. See id. At this stage of the proceeding, "uncontroverted allegations in plaintiff's complaint must be taken as true, and '[c]onflicts between parties over statements contained in affidavits must be resolved in the plaintiff's favor.'" Id. (quoting Schwarzenegger, 374 F.3d at 800). On the other hand, courts "may not assume the truth of allegations in a pleading which are contradicted by affidavit." Mavrix Photo, Inc. v. Brand Techs., Inc., 647 F.3d 1218, 1223 (9th Cir. 2011).
If the Court determines that a complaint should be dismissed, it must then decide whether to grant leave to amend. Under Rule 15(a) of the Federal Rules of Civil Procedure, leave to amend "shall be freely given when justice so requires," bearing in mind "the underlying purpose of Rule 15 to facilitate decisions on the merits, rather than on the pleadings or technicalities." Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (en banc) (). When dismissing a complaint for failure to state a claim, "a district court should grant leave to amend even if no request to amend the pleading was made, unless it determines that the pleading could not possibly be cured by the allegation of other facts." Id. at 1130 (internal quotation marks omitted). Accordingly, leave to amend generally shall be denied only if allowing amendment would unduly prejudice the opposing party, cause undue delay, or be futile, or if the moving party has acted in bad faith. Leadsinger, Inc. v. BMG Music Publ'g, 512 F.3d 522, 532 (9th Cir. 2008).
Defendants' motion to dismiss argues that each of Plaintiff's four claims should be dismissed under Rule 12(b)(6) for failure to state a claim. Mot. at 7-19. As an independent ground for dismissal, Defendants also argue that Plaintiff's claims against Nreal should be dismissed under Rule 12(b)(2) for lack of personal jurisdiction. Accordingly, the Court first considers each of Plaintiff's four claims in turn before considering Defendant's arguments about the Court's personal jurisdiction over Nreal.
Plaintiff's first claim, which is asserted against Xu, alleges that Xu breached the parties' Proprietary Information and Inventions Agreement ("PIIA"). Compl. ¶ 3, 35-42. Defendants argue that the Court should dismiss this breach of contract claim for two reasons. Mot. at 7-10. First, Defendants argue that the breach of contract claim fails as a matter of law because the contract is an unenforceable restraint against trade. Id. at 7-9 (citing Cal. Bus. & Prof. Code § 16600). Second, Defendants argue that Plaintiff has not adequately pleaded any breach. Id. at 9-10. The Court addresses each argument in turn.
Defendants argue...
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