Mattson Tech. v. Applied Materials, Inc.
| Docket Number | A165378 |
| Decision Date | 01 November 2023 |
| Parties | MATTSON TECHNOLOGY, INC., Plaintiff and Appellant, v. APPLIED MATERIALS, INC., Defendant and Respondent. |
| Court | California Court of Appeals Court of Appeals |
Alameda County Superior Court, No. 22CV007997, Hon. Evelio M Grillo
Complex Appellate Litigation Group LLP, Rex Heinke and Ben Feuer; Singer Cashman LLP, Adam S. Cashman, Benjamin L Singer, and Doug Tilley, for Plaintiff and Appellant.
King & Spalding LLP, Quyen L. Ta, Arwen R. Johnson, and Suzanne E. Nero; James Pooley PLC, James Pooley; Gibson Dunn, Blaine Evanson, for Defendant and Respondent.
After many years at Applied Materials, Inc. (Applied), Canfeng Lai left for a new job at Mattson Technology, Inc. (Mattson). First, however, he emailed himself a number of files containing Applied trade secrets. Applied sued both Lai and Mattson for violating the Uniform Trade Secrets Act (Civ. Code, § 3426 et seq.; the Act)[1] and, as against Lai, for breaching his employment contract. The court granted Lai's motion to compel arbitration under the arbitration clause in his employment contract but rejected Mattson's claim that it, too, was entitled to arbitrate. It then denied Mattson's motion to stay the litigation pending Lai's arbitration and issued a preliminary injunction to protect Applied's confidential information pending the proceedings.
Mattson asserts all of these ruling were erroneous. We agree only in part. The court correctly found that Mattson, as a nonparty to Lai's employment contract with Applied, could not compel Applied to arbitrate against it. It also properly issued the preliminary injunction. However, it erred in declining to stay the litigation against Mattson pending arbitration of its claims against Lai.
After a 15-year stint with Applied ending in 2012, Lai returned to work as an Electrical Engineering Director in its Dielectric Deposition Products group from September 2018 to February 2022. Lai's group works on products used for manufacturing semiconductor chips. His position gave him access to many of Applied's trade secrets, such as scientific and experimentation data and 3D renderings of semiconductor manufacturing tools. He also participated in highly confidential meetings with his team, Applied executives, and other Applied engineering groups.
Mattson, a core subsidiary of Beijing E-Town Semiconductor Technology Co., Ltd., is a direct competitor of Applied. It, too, produces equipment for making semiconductor chips and, in particular, for "etching" - the selective removal of electrically insulating layers that had been added through a process called deposition. While Mattson does not produce equipment for deposition, Beijing E-Town publicly announced its intention to expand into that market after acquiring Mattson in 2016.
Over a 14-month period starting in January 2021, Mattson recruited 17 of Applied's employees. Many were highly placed executives or engineers; 10 were from Lai's Dielectric Deposition Products group. Upon leaving Applied, most of them wiped and restored their Applied iPhones to factory settings and evaded telling Applied they were going to Mattson; some even lied about their new employer's identity.
In early February 2022, Lai accepted a job offer from Mattson. A week later he told Applied he was leaving, but, like others before him, refused to identify his new employer at that time.
Before his last day at Applied, Lai accessed proprietary information from Applied's cloud-based storage system. Using his laptop, he sent over a dozen e-mails attaching highly confidential Applied documents-many of them clearly marked as such-to two personal email accounts. Then, in his final days at Applied, he accessed scores of additional highly sensitive files. Nonetheless, he signed a separation certificate stating he had not retained any Applied information and confirmed this in two separate exit interviews (at which he acknowledged he was leaving to join Mattson). Because he wiped his work phone before returning it, Applied could not determine whether he had used it to send himself additional material. After starting his new job, Lai logged into both of his personal email accounts on his Mattson computer.
Lai admitted this conduct under penalty of perjury, and that he had not been "forthcoming" about it during his exit process. He had taken the documents, he explained, "principally to keep 'souvenirs' of [his] accomplishments at the company," not to use or disclose any confidential Applied information in his new job. Later, however, he admitted some of those "souvenirs" had nothing to do with his work at Applied but did relate to his new position at Mattson.
Both defendants have consistently maintained that Lai never disclosed any Applied information to Mattson. Mattson denies any knowledge of or involvement in Lai's actions.
Applied sued Mattson and Lai and moved for a temporary restraining order. The complaint stated two causes of action:
misappropriation under the Act against both defendants, and, as against Lai, breach of his employment agreement. The trial court granted a temporary restraining order enjoining Mattson and Lai from accessing, using, or altering any Applied trade secrets pending further proceedings.
Upon learning of the lawsuit, Lai immediately deleted the emails he had sent to his Yahoo account. (He later explained he would have done the same with his Gmail account if he had remembered to.) Then, after communicating with Mattson's lawyers, he downloaded a confidential Applied document to his Mattson laptop before deleting it a moment later.
Shortly afterward, Mattson put Lai on leave and had a forensic computer examiner cut off his access to both of his personal email accounts and sequester his iPhone, his Mattson and personal laptops, and his personal desktop computer.
Mattson and Lai moved to compel arbitration and stay the court proceedings based on the arbitration clause in the Applied-Lai employment contract. The court granted the motion to compel as to Applied's action against Lai; denied it as to Mattson; denied Mattson's motion to stay the litigation pending arbitration; and issued a preliminary injunction prohibiting Lai and Mattson from accessing or using Applied's confidential information pending resolution of its claims.
Mattson is not a party to the arbitration agreement between Lai and Applied. It contends, however, that principles of equitable estoppel require Applied to arbitrate its misappropriation claim against the company. The facts are not in dispute, so we review the trial court's denial of arbitration de novo. (OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 126; Thomas v. Westlake (2012) 204 Cal.App.4th 605, 613.)
Generally only signatories to a contract are bound by or may invoke its arbitration clause. (Goldman v. KPMG, LLP (2009) 173 Cal.App.4th 209, 234 (Goldman).) Arbitration is a matter of contract, and the threshold question for a court is whether an agreement between the parties exists. (Code Civ. Proc., § 1281.2.)
Equitable estoppel provides a limited exception to this general rule. When a signatory to a contract asserts claims against a non-signatory that rely upon, or are inextricably bound up with, the contract terms, the non-signatory may invoke an arbitration clause in the same contract. (Pacific Fertility Cases (2022) 85 Cal.App.5th 887, 893; Goldman, supra, 173 Cal.App.4th at pp. 219, 221-225.)
This makes sense. As a matter of fairness, when a party to a contract seeks to hold a non-signatory defendant liable for obligations imposed by the contract, the party cannot evade an arbitration clause in the contract simply because the defendant is a non-signatory. (See Pacific Fertility Cases, supra, 85 Cal.App.5th at pp. 892-893; UFCW &Employers Benefit Trust v. Sutter Health (2015) 241 Cal.App.4th 909, 929-930 (UFCW); DMS Services, LLC v. Superior Court (2012) 205 Cal.App.4th 1346, 1354.) It's a two-way street.
Keeping this policy in mind helps define the limits of the rule. It is not enough that a complaint simply refers to a contract; the claims must be founded on the contract. (UFCW, supra, 241 Cal.App.4th at pp. 930-931; Goldman, supra, 173 Cal.App.4th at pp. 218-219.) Nor is it sufficient that a complaint alleges collusion between a signatory and non-signatory defendant (Goldman, supra, at pp. 218-219), or that the controversy would not have occurred but for the existence of the contract, provided the contract is not the basis for the claims against the non-signatory. (UFCW, supra, at p. 930; Pacific Fertility, supra, 85 Cal.App.5th at p. 896) In these situations, the policy rationale for equitable estoppel-"relying on an agreement for one purpose while disavowing the arbitration clause of the agreement"-does not exist. (Goldman, supra, at p. 230.)
Waymo LLC v. Uber Techs., Inc (N.D. Cal. 2017) 252 F.Supp.3d 934 (Waymo I), applied these principles to facts very like those here. Levandowski, a former Waymo employee, allegedly misappropriated Waymo trade secrets for the benefit of a competitor, Uber. Waymo sued Uber under several state and federal statutes, and it initiated arbitration proceedings against Levandowski based on an arbitration provision in his employment agreement (Id. at p. 936; Waymo LLC v. Uber Techs., Inc. (Fed. Cir. 2017) 870 F.3d 1342, 1343-1344 (Waymo II) [affirming Waymo I].)
Uber moved to compel Waymo to arbitrate its claims against the company as well. The federal court denied the motion. Applying California law, it found those claims did not rely on the terms of Levandowski's employment contract; to the contrary, Waymo expressly forswore reliance on the contract to prove its misappropriation claims against Uber. (Waymo I, supra, 252...
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