Spark Connected, LLC v. Semtech Corp.

• Decision Date: 24 November 2020
• Docket Number: Case No. 4:18-cv-748-KPJ
• Citation: 502 F.Supp.3d 1131
• Parties: SPARK CONNECTED, LLC, Ken Moore, Emanuel Stingu, and Ruwanga Dassanayake, Plaintiffs and Counter-Defendants, v. SEMTECH CORPORATION, Defendant and Counter-Plaintiff.
• Court: U.S. District Court — Eastern District of Texas

502 F.Supp.3d 1131

SPARK CONNECTED, LLC, Ken Moore, Emanuel Stingu, and Ruwanga Dassanayake, Plaintiffs and Counter-Defendants,

v.SEMTECH CORPORATION, Defendant and Counter-Plaintiff.

Case No. 4:18-cv-748-KPJ

United States District Court, E.D. Texas, Sherman Division.

Signed November 24, 2020

Brian Lawrence King, Gary R Sorden, Timothy J.H. Craddock, Aaron Douglas Davidson, Cole Schotz, PC - Dallas, Dallas, TX, for Plaintiffs and Counter-Defendants.

Cara L. Gagliano, O'Melveny & Myers LLP - San Francisco, San Francisco, CA, Darin W. Snyder, Pro Hac Vice, David Sebastian Almeling, Pro Hac Vice, O'Melveny & Myers - San Francisco, San Francisco, CA, James Michael Young, Roger D. Sanders, Sanders O'Hanlon, Motley & Young, Sherman, TX, Ramon Ramirez, O'Melveny & Myers LLP Menlo Park, Menlo Park, CA, for Defendant and Counter-Plaintiff.

MEMORANDUM OPINION AND ORDER

KIMBERLY C. PRIEST JOHNSON, UNITED STATES MAGISTRATE JUDGE

Before the Court is Defendant and Counter-Plaintiff Semtech Corporation's ("Semtech") Motion to Dismiss, or in the Alternative for Partial Summary Judgment of, Spark Connected, LLC's ("Spark") Claims for Business Disparagement and Tortious Interference (the "Motion") (Dkt. 299), to which Plaintiff and Counter-Defendant Spark filed a response (Dkt. 310), Semtech filed a reply (Dkt. 320), and Spark filed a notice of supplemental authority (Dkt. 331). On September 1, 2020, the Court heard oral argument on the Motion (the "Hearing"). See Dkt. 332. For the reasons explained below, Semtech's Motion (Dkt. 299) is GRANTED .

I. BACKGROUND

Plaintiffs Ken Moore, Emanuel Stingu, and Ruwanga Dassanayake (collectively, "Individual Plaintiffs") are all former employees of Semtech and current employees of Spark. See Dkt. 289 at 4. At different points in time, Individual Plaintiffs and Semtech entered into various agreements, including a covenant not to compete agreement, a non-solicitation agreement, and multiple confidentiality agreements. See Dkt. 1 at 3–4; Dkt. 77-1 at 57–58; Dkt. 289 at 5. After his separation from Semtech, Ken Moore formed Spark and, shortly thereafter, Emanuel Stingu and Ruwanga Dassanayake separated from Semtech and joined Spark, where they all currently develop and provide wireless power solutions. See Dkt. 77 at 7–12. On October 17, 2018, Spark and Individual Plaintiffs (collectively, "Plaintiffs") filed suit, "seeking declaratory judgment that Plaintiffs have not breached any agreements with [Semtech] and/or misappropriated trade secrets belonging to [Semtech]." Dkt. 1 at 1.

On November 16, 2018, Semtech answered Plaintiffs’ Complaint and asserted seven (7) counterclaims (the "Counterclaims"), including misappropriation of trade secrets, breach of contract, breach of fiduciary duty, and tortious interference.

See Dkt. 7. Specifically, Semtech alleged Plaintiffs misappropriated thirty-one (31) trade secrets. See id. (asserting Counterclaims); Dkt. 21 (specifying trade secrets). On November 21, 2018, Semtech filed a Motion for Preliminary Injunction (Dkt. 14), wherein Semtech sought to enjoin Plaintiffs from misappropriating Semtech's thirty-one (31) trade secrets and violating the confidentiality agreements executed by Individual Plaintiffs and Semtech. See Dkt. 14.

On December 21, 2018—one month after filing its Motion for Preliminary Injunction—Semtech published the following press release, titled "Semtech Files Claims Against Spark Connected, Ken Moore, Emanuel Stingu, and Ruwanga Dassanayake," on its website:

CAMARILLO, Calif., Dec. 21, 2018 — Semtech Corporation (Nasdaq: SMTC), a leading supplier of high performance analog and mixed-signal semiconductors and advanced algorithms, announced that on November 16, 2018, it filed Counterclaims against Spark Connected, LLC ("Spark") and three current Spark employees who were formerly employed by Semtech:

Ken MooreEmanuel StinguRuwanga Dassanayake

Semtech alleges in its Counterclaims "a pattern of conduct in which Moore and Spark have improperly competed with Semtech, solicited Semtech employees, encouraged them to retain and disclose Semtech's confidential information and trade secrets, and used such information and trade secrets to compete directly with Semtech in the wireless power market." Semtech alleges the following causes of action:

• Spark and each of the three former Semtech employees violated federal and state law by misappropriating Semtech's technical and business trade secrets related to wireless charging;

• Mr. Moore breached provisions of agreements he has with Semtech, including non-competition, non-solicitation, and confidentiality provisions;

• Messrs. Stingu and Dassanayake breached confidentiality provisions of agreements they have with Semtech;

• Messrs. Moore, Stingu, and Dassanayake violated their fiduciary duties to Semtech; and

• Spark and Messrs. Moore and Stingu improperly interfered with Semtech's contractual relations.

"Semtech intends to take all actions necessary to vigorously protect its intellectual property rights," said Mohan Maheswaran, Semtech's President and Chief Executive Officer.

Those actions include seeking assistance from the Court. Shortly after Semtech filed its Counterclaims, on November 21, 2018, Semtech also filed a Motion for Preliminary Injunction that asks the Court to, among other things, stop Spark and Moore from conducting business that unfairly competes with Semtech and stop Spark and Messrs. Moore, Stingu, and Dassanayake from doing any further work that misappropriates Semtech's trade secrets. Semtech submitted with that Motion a Declaration from a computer forensics expert that describes the current results of his ongoing investigation.

The action is pending in the United States District Court for the Eastern District of Texas, Case No. 4:18-cv-00748. Copies of Semtech's Counterclaims and its Motion for a Preliminary Injunction can be accessed here:

• https://www.semtech.com/uploads/documents/Semtech_Corporation_Motion_for_Preliminary_Injunction.pdf • https://www.semtech.com/uploads/documents/Semtech_Corporation_Answer_Affirmative_Defenses_and_Counterclaims.pdf

(the "Press Release") Dkt. 300-1.

On May 8, 2019, prior to the hearing regarding Semtech's Motion for Preliminary Injunction, Semtech filed an Amended Answer and Counterclaims (Dkt. 131), in which Semtech no longer asserted the following claims: that Spark and Moore breached a fiduciary duty owed to Semtech, that Individual Plaintiffs breached their non-solicitation agreements, and that Plaintiffs tortiously interfered with Semtech's contractual relations. Compare Dkt. 7 at 23–41 (initial Answer and Counterclaims) with Dkt. 131 at 23–38 (Amended Answer and Counterclaims). The same day, Semtech filed a response to Plaintiffs’ pending Motion for Partial Summary Judgment, wherein Semtech represented it no longer asserted that Plaintiffs misappropriated nineteen (19) of the thirty-one (31) trade secrets originally asserted in Semtech's Counterclaims. See Dkt. 134 at 7. Semtech further narrowed its trade secret claims to four (4) alleged trade secrets after the Court denied Semtech's Motion for Preliminary Injunction. See Dkt. 289 at 8. Because Semtech has dropped multiple Counterclaims and trade secrets, Plaintiffs allege, as of February 27, 2020, Semtech has not "retracted or corrected the press release and has continued to publish that press release on its website" in "bad faith." See id. at 9; Dkt. 310.

Plaintiffs filed their Second Amended Complaint (Dkt. 289) on December 4, 2019, wherein Spark asserts claims against Semtech for business disparagement and tortious interference with business relations. See id. at 14–17. Spark bases its business disparagement and tortious interference claims on both Semtech's Press Release and remarks Semtech allegedly made to Shanghai Magway Magnetic Co. Ltd. ("Magway"), Spark's potential business partner. See id.¹

On February 5, 2020, Semtech filed the Motion, arguing that Spark's business disparagement and tortious interference claims based on the Press Release should be dismissed pursuant to the judicial proceedings privilege.² See Dkt. 299 at 5. Semtech's Motion does not argue the privilege applies to the alleged disparaging statements made by Semtech to Magway. See id. Spark then filed its response (Dkt. 310), to which Semtech filed its reply (Dkt. 320), and Spark filed a notice of supplemental authority (Dkt. 331).

On September 1, 2020, the Court heard oral argument regarding the Motion at the Hearing. See Dkt. 332.

II. LEGAL STANDARD

A party may seek dismissal in a pretrial motion based on any of the defenses set out in Rule 12(b) of the Federal Rules of Civil Procedure. FED. R. CIV. P. 12(b) ; see also Albany Ins. Co. v. Almacenadora Somex , 5 F.3d 907, 909 (5th Cir. 1993). Rule 12(b)(6) provides that a party may move for dismissal of an action for failure to state a claim upon which relief can be granted. FED. R. CIV. P. 12(b)(6). The court must accept as true all well-pleaded facts contained in the plaintiff's complaint and view them in the light most favorable to the plaintiff. Baker v. Putnal , 75 F.3d 190, 196 (5th Cir. 1996). A claim will survive an attack under Rule 12(b)(6) if it "may be supported by showing any set of facts consistent with the allegations in the complaint." Bell Atlantic Corp. v. Twombly , 550 U.S. 544, 563, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). In other words, a claim may not be dismissed based solely on a court's supposition that the pleader is unlikely "to find evidentiary support for his allegations or prove his claim to the satisfaction of the factfinder." Id. at 563 n.8, 127 S.Ct. 1955. However, courts are "not bound to accept as true a legal conclusion couched as a factual allegation." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citing Twombly , 550 U.S. at 555, 127 S.Ct. 1955 ).

When considering a motion to dismiss, the court's review is limited to the complaint, any documents attached to the complaint, and any document attached to...