Pro Flexx LLC v. Yoshida, Civ. No. 20-00512 SOM-KJM

• Court: United States District Courts. 9th Circuit. United States District Court (Hawaii)
• Parties: PRO FLEXX LLC, Plaintiff, v. GREG HIROSHI YOSHIDA dba GY FITNESS; ROSELYN ESTRADA BUMANGLAG dba GY FITNESS; GY FITNESS TRAINING AND NUTRITION, LLC, dba GY FITNESS AND NUTRITION, et al. Defendants.
• Docket Number: Civ. No. 20-00512 SOM-KJM
• Decision Date: 28 January 2021

PRO FLEXX LLC, Plaintiff,
v.
GREG HIROSHI YOSHIDA dba GY FITNESS;
ROSELYN ESTRADA BUMANGLAG dba GY FITNESS;
GY FITNESS TRAINING AND NUTRITION, LLC,
dba GY FITNESS AND NUTRITION, et al. Defendants.

Civ. No. 20-00512 SOM-KJM

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF HAWAII

January 28, 2021

ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS

I. INTRODUCTION.

This case, removed to this court on the basis of federal question jurisdiction, concerns a business dispute involving former colleagues who are now competitors. Plaintiff Pro Flexx LLC says that one of its members and managers, Defendant Greg Hiroshi Yoshida, and a volunteer, Defendant Roselyn Estrada Bumanglag, took and used its confidential business information to create and operate a competing business, Defendant GY Fitness Training and Nutrition.

Pro Flexx asserts 17 claims against the Defendants in this removed case. See First Amended Complaint, ECF No. 1-2. Defendants seek dismissal of Counts 1, 2, 3, 6, 7, 8, 10, 11, 12, 13, and 15 of the First Amended Complaint. See ECF No. 7. Pro

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Flexx has agreed to dismiss of Counts 2, 3, 6, 12, and 15. The remainder of the motion is granted in part and denied in part.

II. STANDARD.

Under Rule 12(b)(6) of the Federal Rules of Civil Procedure, the court's review is generally limited to the contents of a complaint. Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9^th Cir. 2001); Campanelli v. Bockrath, 100 F.3d 1476, 1479 (9^th Cir. 1996). On a Rule 12(b)(6) motion to dismiss, all allegations of material fact are taken as true and construed in the light most favorable to the nonmoving party. Fed'n of African Am. Contractors v. City of Oakland, 96 F.3d 1204, 1207 (9^th Cir. 1996). However, conclusory allegations of law, unwarranted deductions of fact, and unreasonable inferences are insufficient to defeat a motion to dismiss. Sprewell, 266 F.3d at 988; Syntex Corp. Sec. Litig., 95 F.3d 922, 926 (9^th Cir. 1996).

"[T]o survive a Rule 12(b)(6) motion to dismiss, factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true even if doubtful in fact." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal quotation marks omitted); accord Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) ("[T]he pleading standard Rule 8 announces does not require 'detailed factual allegations,' but it demands more than

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an unadorned, the-defendant-unlawfully-harmed-me accusation"). "While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, 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." Twombly, 550 U.S. at 555. The complaint must "state a claim to relief that is plausible on its face." Id. at 570. "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." Iqbal, 556 U.S. at 678.

III. BACKGROUND.

While Defendants' motion attempts to frame the facts in this business dispute, this court's review is limited to the facts alleged in the First Amended Complaint. Accordingly, for purposes of this motion, the court ignores Defendants' contention that they started a competing business only after being locked out of Pro Flexx and focuses only on the allegations contained in the First Amended Complaint.

Pro Flexx "is a seller of body building, weight lifting, and health supplements, supplies, equipment and related services." ECF No. 1-2, PageID # 8.

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On or about September 9, 2016, Yoshida created Pro Flexx by filing its Article of Organization for Limited Liability Company with the Hawaii Department of Commerce and Consumer Affairs. Pro Flexx has two member-managers, Yoshida and Kelly Anderson. Id., PageID #s 9-10. As a member and manager, Yoshida had access to Pro Flexx's computer system that tracked

such confidential data and information as customers' names, addresses, email addresses, sales history, and financial information, along with data and information on inventory levels, which inventory sold the best, pricing (wholesale and retail), and other confidential, private and valuable data belonging to [Pro Flexx]. Additionally, . . . Yoshida had access to supplier data and information for [Pro Flexx] . . . .

Id., PageID # 10. The First Amended Complaint refers to this data and information as "Trade Secrets," and alleges that the information is not generally known to the public, was accumulated through Pro Flexx's efforts and business dealings, and was reasonably protected from disclosure. Id., PageID # 11.

The First Amended Complaint alleges that Yoshida is now doing business as GY Fitness, which was created on September 15, 2020, and competes directly with Pro Flexx in selling body building goods and services.¹ Bumanglag, the former Pro Flexx

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volunteer, is allegedly Yoshida's girlfriend and managing GY Fitness with Yoshida. Id., PageID #s 11-13.

The First Amended Complaint contends that, as a member and manager of Pro Flexx, Yoshida owes a fiduciary duty and a duty of loyalty to it under section 428-409 of the Hawaii Revised Statutes. Id., PageID # 12.

The First Amended Complaint alleges that Bumanglag volunteered with Pro Flexx and executed an agreement with Pro Flexx that she would 1) loyally and conscientiously perform all of the duties required of her; 2) "not directly or indirectly solicit, induce, recruit or encourage any of the Company's employees, representatives, or consultants to terminate their relationship with the Company"; 3) "not, for a period of 24 months following cessation of employment with the Company . . . [,] attempt to negatively influence any of the Company's clients or customers from purchasing Company products or services or to solicit or influence or attempt to influence any customer or other person either directly or indirectly, to direct his, her or its purchase of products and/or services to any person, firm, corporation, institution or other entity in competition with the business of the Company"; and 4) indefinitely . . . agree . . . [to refrain from] directly or indirectly, defam[ing], disparag[ing], creat[ing] false impressions, or otherwise put[ting] in a false or bad light the Company, its products or

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services, its business, reputation, conduct, practices, past or present employees, financial condition or otherwise." Id., PageID #s 13-14.

The table below summarizes the seventeen counts asserted in the First Amended Complaint, as well as this court's ruling with respect to this motion to dismiss.

Count	Against Defendant	Result
1 - Breach of; Contract	Bumanglag	Motion to dismiss; denied
2- Breach of the; Covenant of Good; Faith and Fair; Dealing	Bumanglag	Dismissed by Pro; Flexx
3 - Conversion	Yoshida, Bumanglag,; and GY Fitness	Dismissed by Pro; Flexx
4 - Violation of; HRS Chapter 482B; (Trade Secrets)	Yoshida, Bumanglag,; and GY Fitness	Not subject of; motion to dismiss
5 - Violation of; Defend Trade; Secret Act, 18; U.S.C. § 1836	Yoshida, Bumanglag,; and GY Fitness	Not subject of; motion to dismiss
6 - Common Law; Misappropriation; of Confidential; Information and; Trade Secrets	Yoshida, Bumanglag,; and GY Fitness	Dismissed by Pro; Flexx
7 - Tortious; Interference with; Contractual; Relations	Yoshida, Bumanglag,; and GY Fitness	Motion to dismiss; denied
8 - Tortious; Interference with; Prospective; Business Advantage	Yoshida, Bumanglag,; and GY Fitness	Motion to dismiss; denied

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9 - Breach of; Fiduciary Duty and; Duty of Loyalty; under section 428-; 409 of Hawaii; Revised Statutes	Yoshida	Not subject of; motion to dismiss
10 - Unfair; Competition and; Unfair and; Deceptive Trade; Practice under; Chapter 480 of; Hawaii Revised; Statutes	Yoshida	Motion to dismiss; denied with respect; to unfair method of; competition claim,; but granted with; respect to unfair or; deceptive trade; practice claim.
11 - Unfair; Competition and; Unfair and; Deceptive Trade; Practice under; Chapter 480 of; Hawaii Revised; Statutes	Bumanglag and GY; Fitness Training	Motion to dismiss; denied with respect; to unfair method of; competition claim,; but granted with; respect to unfair or; deceptive trade; practice claim.
12 - Restitution /; Equitable Lien /; Constructive Trust; / Unjust; Enrichment	Yoshida, Bumanglag,; and GY Fitness	Dismissed by Pro; Flexx
13 - Civil; Conspiracy	Yoshida, Bumanglag,; and GY Fitness	Motion to dismiss; denied
14 - Racketeer; Influenced and; Corrupt; Organizations Act	Yoshida, Bumanglag,; and GY Fitness	Not subject of; motion to dismiss
15 - Injunctive; Relief	Yoshida, Bumanglag,; and GY Fitness	Dismissed by Pro; Flexx
16 - Accounting	Yoshida, Bumanglag,; and GY Fitness	Not subject of; motion to dismiss
17 - Expulsion	Yoshida	Not subject of; motion to dismiss

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IV. ANALYSIS.

A. The Motion to Dismiss is Denied With Respect to Count 1 (Breach of Contract Claim Against Bumanglag).

Count 1 of the First Amended Complaint asserts that Bumanglag breached her agreement with Pro Flexx. The Motion to Dismiss argues with little analysis that Count 1 should be dismissed as an improper restraint on trade, contending that the primary purpose of the restrictive covenants in Bumanglag's agreement was to limit competition, and that the restrictive covenants are therefore void under section 480-4 of Hawaii Revised Statutes.

Count 1 does not specifically allege how Bumanglag breached her agreement with Pro Flexx, instead incorporating by reference preceding paragraphs. See id., PageID # 16. The early paragraphs of the First Amended Complaint allege that Bumanglag sold body building goods and services either individually or in cooperation with Yoshida and that these actions violated the agreement in four ways: 1) Bumanglag failed to loyally and conscientiously perform...