This case was last updated from Los Angeles County Superior Courts on 09/25/2021 at 05:53:01 (UTC).

PARAMOUNT EXCLUSIVE INSURANCE SERVICES, INC, A CALIFORNIA CORPORATION VS NEWFRONT INSURANCE SERVICES, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY, ET AL.

Case Summary

On 05/29/2020 PARAMOUNT EXCLUSIVE INSURANCE SERVICES, INC, A CALIFORNIA CORPORATION filed a Contract - Business lawsuit against NEWFRONT INSURANCE SERVICES, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY. This case was filed in Los Angeles County Superior Courts, Stanley Mosk Courthouse located in Los Angeles, California. The Judge overseeing this case is CHRISTOPHER K. LUI. The case status is Pending - Other Pending.

Case Details Parties Documents Dockets

 

Case Details

  • Case Number:

    *******0468

  • Filing Date:

    05/29/2020

  • Case Status:

    Pending - Other Pending

  • Case Type:

    Contract - Business

  • County, State:

    Los Angeles, California

Judge Details

Presiding Judge

CHRISTOPHER K. LUI

 

Party Details

Plaintiffs and Cross Defendants

PARAMOUNT EXCLUSIVE INSURANCE SERVICES INC A CALIFORNIA CORPORATION

PARAMOUNT EXCLUSIVE INSURANCE SERVICES INC

PARAMOUNT EXCLUSIVE INSURANCE SERVICES INC.

KOHEN SHAWN

Defendants, Appellants and Cross Plaintiffs

CABIR SHANTELLE

NEWFRONT INSURANCE SERVICES LLC A CALIFORNIA LIMITED LIABILITY COMPANY

NEWFRONT INSURANCE SERVICES LLC

Plaintiff, Respondent and Cross Defendant

PARAMOUNT EXCLUSIVE INSURANCE SERVICES INC.

Attorney/Law Firm Details

Plaintiff and Cross Defendant Attorneys

FARROW JEFFREY D.

FARROW JEFFREY DEAN

BERNARD CHAD D.

Defendant and Cross Plaintiff Attorneys

TAYLOR DANIEL J

RUDDELL HOWARD

RUDDELL HOWARD D.

HUDSON ESRA A.

 

Court Documents

Certificate of Mailing for - CERTIFICATE OF MAILING FOR (RULING ON SUBMITTED MATTER) OF 09/08/2021

9/8/2021: Certificate of Mailing for - CERTIFICATE OF MAILING FOR (RULING ON SUBMITTED MATTER) OF 09/08/2021

Status Report

8/5/2021: Status Report

Stipulation and Order - STIPULATION AND PROTECTIVE ORDER - CONFIDENTIAL DESIGNATION ONLY

8/9/2021: Stipulation and Order - STIPULATION AND PROTECTIVE ORDER - CONFIDENTIAL DESIGNATION ONLY

Declaration - DECLARATION OF HOWARD D. RUDDELL IN SUPPORT OF DEFENDANT SHANTELLE CABIR'S MOTION TO COMPEL ARBITRATION

6/15/2021: Declaration - DECLARATION OF HOWARD D. RUDDELL IN SUPPORT OF DEFENDANT SHANTELLE CABIR'S MOTION TO COMPEL ARBITRATION

Notice - NOTICE OF CONTINUANCE OF: 1.) MOTION TO STRIKE PORTIONS OF NEWFRONT INSURANCE SERVICES, LLCS CROSS-COMPLAINT; 2.) DEMURRER TO NEWFRONT

4/27/2021: Notice - NOTICE OF CONTINUANCE OF: 1.) MOTION TO STRIKE PORTIONS OF NEWFRONT INSURANCE SERVICES, LLCS CROSS-COMPLAINT; 2.) DEMURRER TO NEWFRONT

Opposition - OPPOSITION PLAINTIFFS OPPOSITION TO EX PARTE APPLICATION FOR TEMPORARY STAY OF CIVIL COURT ACTION; DECLARATION OF JEFFREY FARROW

4/1/2021: Opposition - OPPOSITION PLAINTIFFS OPPOSITION TO EX PARTE APPLICATION FOR TEMPORARY STAY OF CIVIL COURT ACTION; DECLARATION OF JEFFREY FARROW

Request for Judicial Notice

3/24/2021: Request for Judicial Notice

Demurrer - with Motion to Strike (CCP 430.10)

3/24/2021: Demurrer - with Motion to Strike (CCP 430.10)

Declaration - DECLARATION OF ESRA ACIKALIN HUDSON

4/1/2021: Declaration - DECLARATION OF ESRA ACIKALIN HUDSON

Declaration - DECLARATION OF ESRA ACIKALIN HUDSON

1/14/2021: Declaration - DECLARATION OF ESRA ACIKALIN HUDSON

Declaration - DECLARATION OF SHANTELLE CABIR IN SUPPORT OF DEFENDANT AND CROSS-COMPLAINANT SHANTELLE CABIR'S OPPOSITION TO PLAINTIFF AND CROSS-DEFENDANTS' MOTION TO COMPEL ARBITRATION

1/14/2021: Declaration - DECLARATION OF SHANTELLE CABIR IN SUPPORT OF DEFENDANT AND CROSS-COMPLAINANT SHANTELLE CABIR'S OPPOSITION TO PLAINTIFF AND CROSS-DEFENDANTS' MOTION TO COMPEL ARBITRATION

Stipulation and Order - JOINT STIPULATION TO EXTEND PLAINTIFF AND CROSS-DEFENDANT PARAMOUNT EXCLUSIVE INSURANCE SERVICES, INC.'S RESPONSIVE PLEADING DEADLINE TO DEFENDANT AND CROSS-COMPLAINANT NEWFRON

1/29/2021: Stipulation and Order - JOINT STIPULATION TO EXTEND PLAINTIFF AND CROSS-DEFENDANT PARAMOUNT EXCLUSIVE INSURANCE SERVICES, INC.'S RESPONSIVE PLEADING DEADLINE TO DEFENDANT AND CROSS-COMPLAINANT NEWFRON

Certificate of Mailing for - CERTIFICATE OF MAILING FOR (RULING ON SUBMITTED MATTER) OF 10/30/2020

10/30/2020: Certificate of Mailing for - CERTIFICATE OF MAILING FOR (RULING ON SUBMITTED MATTER) OF 10/30/2020

Declaration - DECLARATION OF KRISTINA RODRIGUEZ IN SUPPORT OF CROSS-DEFENDANTS MOTION TO COMPEL PLAINTIFF SHANTELLE CABIR CLAIMS TO ARBITRATION AND TO DISMISS CLASS CLAIMS

10/14/2020: Declaration - DECLARATION OF KRISTINA RODRIGUEZ IN SUPPORT OF CROSS-DEFENDANTS MOTION TO COMPEL PLAINTIFF SHANTELLE CABIR CLAIMS TO ARBITRATION AND TO DISMISS CLASS CLAIMS

Opposition - OPPOSITION PLAINTIFF AND CROSS-DEFENDANTS OPPOSITION TO DEMURRER OF DEFENDANT NEWFRONT INSURANCE SERVICES, LLC; MEMORANDUM OF POINTS AND AUTHORITIES

9/25/2020: Opposition - OPPOSITION PLAINTIFF AND CROSS-DEFENDANTS OPPOSITION TO DEMURRER OF DEFENDANT NEWFRONT INSURANCE SERVICES, LLC; MEMORANDUM OF POINTS AND AUTHORITIES

Case Management Statement

9/29/2020: Case Management Statement

Demurrer - without Motion to Strike

8/17/2020: Demurrer - without Motion to Strike

Declaration - DECLARATION OF HOWARD D. RUDDELL ISO DEMURRER PURSUANT TO CODE OF CIVIL PROCEDURE 430.41

8/17/2020: Declaration - DECLARATION OF HOWARD D. RUDDELL ISO DEMURRER PURSUANT TO CODE OF CIVIL PROCEDURE 430.41

114 More Documents Available

 

Docket Entries

  • 12/08/2021
  • Hearing12/08/2021 at 08:30 AM in Department 76 at 111 North Hill Street, Los Angeles, CA 90012; Case Management Conference

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  • 10/15/2021
  • Hearing10/15/2021 at 08:30 AM in Department 76 at 111 North Hill Street, Los Angeles, CA 90012; Hearing on Demurrer - with Motion to Strike (CCP 430.10)

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  • 10/01/2021
  • Hearing10/01/2021 at 08:30 AM in Department 76 at 111 North Hill Street, Los Angeles, CA 90012; Status Conference

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  • 09/21/2021
  • DocketNotice of Status Conference and Order; Filed by Clerk

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  • 09/17/2021
  • DocketAppeal - Notice of Filing of Notice of Appeal; Filed by Clerk

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  • 09/14/2021
  • DocketRequest for Judicial Notice; Filed by Paramount Exclusive Insurance Services, Inc. (Cross-Defendant)

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  • 09/14/2021
  • DocketDemurrer - with Motion to Strike (CCP 430.10); Filed by Paramount Exclusive Insurance Services, Inc. (Cross-Defendant)

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  • 09/14/2021
  • DocketAppeal - Notice of Appeal/Cross Appeal Filed; Filed by Shantelle Cabir (Appellant)

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  • 09/14/2021
  • DocketDeclaration (OF SAMANTHA A. GAVIN IN SUPPORT OF DEMURRER AND MOTION TO STRIKE); Filed by Paramount Exclusive Insurance Services, Inc. (Cross-Defendant)

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  • 09/14/2021
  • DocketMotion to Strike (not initial pleading); Filed by Paramount Exclusive Insurance Services, Inc. (Cross-Defendant)

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135 More Docket Entries
  • 08/17/2020
  • DocketCross-Complaint; Filed by Shantelle Cabir (Defendant)

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  • 07/17/2020
  • DocketNotice (OF CMC HEARING); Filed by Paramount Exclusive Insurance Services, Inc. (Plaintiff)

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  • 07/17/2020
  • DocketAmended Complaint ((1st)); Filed by Paramount Exclusive Insurance Services, Inc. (Plaintiff)

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  • 07/16/2020
  • DocketNotice and Acknowledgment of Receipt; Filed by Paramount Exclusive Insurance Services, Inc. (Plaintiff)

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  • 06/16/2020
  • DocketProof of Personal Service; Filed by Paramount Exclusive Insurance Services, Inc. (Plaintiff)

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  • 06/05/2020
  • DocketNotice of Case Management Conference; Filed by Clerk

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  • 05/29/2020
  • DocketSummons (on Complaint); Filed by Paramount Exclusive Insurance Services, Inc. (Plaintiff)

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  • 05/29/2020
  • DocketCivil Case Cover Sheet; Filed by Paramount Exclusive Insurance Services, Inc. (Plaintiff)

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  • 05/29/2020
  • DocketComplaint; Filed by Paramount Exclusive Insurance Services, Inc. (Plaintiff)

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  • 05/29/2020
  • DocketNotice of Case Assignment - Unlimited Civil Case; Filed by Clerk

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Tentative Rulings

Case Number: 20STCV20468    Hearing Date: January 28, 2021    Dept: 76

Plaintiff alleges that former-employee Defendant Shantelle Cabir utilized Plaintiff’s trade secrets to solicit Plaintiff’s customers on behalf of competitor Newfront Insurance Services.

Defendant Shantelle Cabir filed a Class Action Cross-Complaint alleging that the class of insurance agents was misclassified as independent contractors, and asserts wage and hour violations. Cabir also asserts individual claims for wrongful termination in retaliation for her complaints about being misclassified, and interference with contractual relations.

Defendant Newfront Insurance Services filed a Cross-Complaint alleging that Plaintiff Paramount pressured, induced and exploited third-party insurance carriers and insurance service providers to boycott Newfront either by terminating Newfront’s appointment or relationship based on falsehoods or to refuse Broker of Record letters signed by the insureds and submitted on Newfront’s behalf by Cabir.

Cross-Defendants Paramount Exclusive Insurance Services, Inc. and Shawn Kohen move to compel Cross-Complainant Shantelle Cabir’s claims to arbitration and to dismiss class claims.

TENTATIVE RULING

Cross-Defendants Paramount Exclusive Insurance Services, Inc. and Shawn Kohen’s motion to compel arbitration of Cabir’s Cross-Complaint is GRANTED. The Court orders the class action allegations severed from Cabir’s Cross-Complaint, and stays this litigation as to the class action allegations in Cabir’s Cross-Complaint only. (Code Civ. Proc., § 1281.4.) Litigation will proceed as to Paramount’s trade secret, etc. claims and Newfront’s cross-claims for interference with contractual relations, etc.

ANALYSIS 

Motion To Compel Arbitration

Request For Judicial Notice

Paramount and Kohen’s request that the Court take judicial notice of Cabir’s Cross-Complaint filed in this action on August 17, 2020 is GRANTED per Evid. Code § 452(d)(court records). The request that the Court take judicial notice of the JAMS Employment Arbitration Rules and Procedures is GRANTED. The Court may take judicial notice of arbitration rules. (Izzi v. Mesquite Country Club (1986) 186 Cal.App.3d 1309, 1318, overruled in part on other grounds in Sandquist v. Lebo Automotive, Inc. (2016) 1 Cal.5th 233, 249-250.)

Discussion

Cross-Defendants Paramount Exclusive Insurance Services, Inc. and Shawn Kohen move to compel Cross-Complainant Shantelle Cabir’s claims to arbitration and to dismiss class claims.

Waiver

The Court will first address the arguments presented in Opposition that Paramount waived the right to compel arbitration by filing this lawsuit. For the reasons discussed below, the Court does not find this argument to be persuasive.

A motion to compel arbitration is properly denied when the moving party has waived its right to do so. (Code Civ. Proc., § 1281.2, subd. (a).) “The question of waiver is generally a question of fact, and the trial court's finding of waiver is binding on us if it is supported by substantial evidence. [*1138] [Citation.]” (Bower v. Inter-Con Security Systems, Inc. (2014) 232 Cal.App.4th 1035, 1043 [181 Cal. Rptr. 3d 729].) Because this is not a case where “only one inference may reasonably be drawn” from the underlying facts, we review the trial court's decision under a substantial evidence standard. (Ibid.; see Sprunk v. Prisma LLC (2017) 14 Cal.App.5th 785, 795 [222 Cal. Rptr. 3d 339] (Sprunk) [substantial evidence standard is the appropriate standard to apply to trial court's determination of relevant litigation events].)

Although “no single test delineates the nature of the conduct that will constitute a waiver of arbitration,” the California Supreme Court has identified the following factors as relevant for consideration: “‘“(1) whether the party's actions are inconsistent with the right to arbitrate; (2) whether ‘the litigation machinery has been substantially invoked’ and the parties ‘were well into preparation of a lawsuit’ before the party notified the opposing party of an intent to arbitrate; (3) whether a party either requested arbitration enforcement close to the trial date or delayed for a long period before seeking a stay; (4) whether a defendant seeking arbitration filed a counterclaim without asking for a stay of the proceedings; (5) ‘whether important intervening steps [e.g., taking advantage of judicial discovery procedures not available in arbitration] had taken place’; and (6) whether the delay ‘affected, misled, or prejudiced’ the opposing party.”’” (St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1195–1196 [8 Cal. Rptr. 3d 517, 82 P.3d 727] (St. Agnes Medical Center); see also Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 374–375 [173 Cal. Rptr. 3d 289, 327 P.3d 129] [“‘California courts have found a waiver of the right to demand arbitration in a variety of contexts, ranging from situations in which the party seeking to compel arbitration has previously taken steps inconsistent with an intent to invoke arbitration [citations] to instances in which the petitioning party has unreasonably delayed in undertaking the procedure’”].) Here, the trial court properly applied the factors set forth in St. Agnes Medical Center and found that Higashi carried the heavy burden of proving that defendants waived the right to arbitration by unreasonably delaying the demand for arbitration, substantially invoking the litigation machinery, and taking steps inconsistent with a right to arbitrate. (St. Agnes Medical Center, supra, at p. 1196.)

(Spracher v. Paul M. Zagaris, Inc. (2019) 39 Cal.App.5th 1135, 1137-38 [bold emphasis added].)

The filing of a lawsuit does not waive contractual arbitration rights where the lawsuit does not involve arbitrable issues. (St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1200-03.)

B. PacifiCare’s Initiation of the Los Angeles Lawsuit

Doers, supra, 23 Cal.3d 180, held that the mere filing of a lawsuit does not waive contractual arbitration rights. ( Doers, at pp. 185–188; see also Kalai v. [*1201] Gray (2003) 109 Cal.App.4th 768, 774 [135 Cal. Rptr. 2d 449]; Johnson v. Siegel (2000) 84 Cal.App.4th 1087, 1099 [101 Cal. Rptr. 2d 412]; accord, Merrill Lynch, Pierce, Fenner & Smith v. Lecopulos (2d Cir. 1977) 553 F.2d 842, 845; Chatham Shipping Co. v. Fertex Steamship Corp. (2d Cir. 1965) 352 F.2d 291, 293; Realco Enterprises, Inc. v. Merrill Lynch, Pierce, Fenner & Smith (S.D.Ga. 1990) 738 F. Supp. 515, 518–519, and cases cited therein.) Although Doers phrased the issue as one of “waiver,” we more recently characterized the critical issue there as “whether a party’s filing of a lawsuit in the face of an agreement to arbitrate was conduct so inconsistent with the exercise of the right to arbitration as to constitute an abandonment of that right.” ( Platt Pacific, Inc. v. Andelson, supra, 6 Cal.4th at p. 318.)

In finding that the filing of a lawsuit, without more, does not result in a waiver (and is not so inconsistent with the exercise of the right to arbitration as to constitute an abandonment of that right), Doers disapproved several Court of Appeal decisions that had misinterpreted other precedents holding only that waiver occurs when the parties have litigated the merits of the arbitrable dispute. ( Doers, supra, 23 Cal.3d at pp. 185–188.) Doers reiterated the rule that a waiver generally does not occur where the arbitrable issues have not been litigated to judgment. ( Id. at p. 188.)

Here, PacifiCare did not initiate the instant Fresno action, in which it seeks to compel arbitration. PacifiCare did, however, initiate the Los Angeles action to have the June 2000 HSA declared void ab initio and to enforce its rights under the 1994 HSA, a contract that contains no arbitration clause and that allegedly governs the parties’ rights and obligations if the June 2000 HSA were to be found unenforceable. Significantly, Saint Agnes’s arbitrable causes of action have not been litigated to judgment or judicially addressed on their merits. Consistent with Doers, we conclude that PacifiCare’s mere filing of the Los Angeles action did not constitute a waiver of its right under the June 2000 HSA to seek arbitration in this Fresno action. (Accord, American Recovery Corp. v. Computerized Thermal Imaging, Inc. (4th Cir. 1996) 96 F.3d 88, 95–96; Lawrence v. Comprehensive Business Services Co. (5th Cir. 1987) 833 F.2d 1159, 1164–1165; cf. Christensen v. Dewor Developments, supra, 33 Cal.3d at pp. 783–784 [waiver found where plaintiff knew of existence of arbitration clause and arbitrability of its claims, but filed suit without first demanding arbitration and pursued litigation through several demurrers for admitted purpose of obtaining verified pleadings from defendants that would reveal their legal theories, resulting in lost evidence].)

Charles J. Rounds Co. v. Joint Council of Teamsters No. 42 (1971) 4 Cal.3d 888 [95 Cal. Rptr. 53, 484 P.2d 1397] (Charles J. Rounds) does not compel us to hold otherwise. In that case, the trial court had dismissed a [*1202] plaintiff employer’s contract action against a defendant union on the ground that the dispute at issue was covered by an arbitration clause in the agreement. As relevant here, the issue presented was whether “the relief granted was proper in this case—dismissal of the action—or whether a stay of judicial proceedings pending arbitration should have been granted.” ( Charles J. Rounds, supra, 4 Cal.3d at p. 894.) We upheld the dismissal, observing that the only matter in dispute came within the scope of the arbitration clause, that the plaintiff had never attempted to pursue its arbitration remedy despite the defendant’s efforts to obtain arbitration, and that because the plaintiff sought relief that traditionally was within an arbitrator’s power to award, dismissal of the action, rather than a mere stay of proceedings, was proper. ( Id. at p. 899.)

Saint Agnes appears to read Charles J. Rounds as precluding any party who “repudiates” arbitration by filing a lawsuit from ever enforcing its contractual arbitration rights. In particular, Saint Agnes relies on a passage in Charles J. Rounds stating that “where the only issue litigated is covered by the arbitration clause, and where plaintiff has not first pursued or attempted to pursue his arbitration remedy, it should be held that … plaintiff has impliedly waived his right to arbitrate.” ( Charles J. Rounds, supra, 4 Cal.3d at p. 899.)

Preliminarily we observe that, to the extent the foregoing passage can be read to suggest that a party may waive its right to arbitration merely by filing a lawsuit without first requesting arbitration, our holding to the contrary in Doers, supra, 23 Cal.3d 180, controls. (See Kalai v. Gray, supra, 109 Cal.App.4th at p. 774.) But Charles J. Rounds held only that dismissing the judicial action there, as opposed to staying it, was appropriate because the sole issue in dispute was properly subject to arbitration. Viewed in context, Charles J. Rounds provides no support for denying arbitration of arbitrable claims in an action where, as here, the party seeking arbitration did not file the lawsuit in which arbitration is sought, but had initiated a separate lawsuit containing nonarbitrable causes of action. (See Charles J. Rounds, supra, 4 Cal.3d at pp. 898–899.)

Nor can Saint Agnes credibly claim that PacifiCare waived its contractual right to arbitration by unequivocally refusing to arbitrate. (See Local 659, I.A.T.S.E. v. Color Corp. Amer. (1956) 47 Cal.2d 189 [302 P.2d 294] [waiver and repudiation found where plaintiff refused defendant’s repeated demands to comply with a contractual arbitration clause].) As the record discloses, Saint Agnes never requested arbitration of the Fresno and the Los Angeles [*1203] actions; Saint Agnes, in fact, rebuffed PacifiCare’s informal request and offer to arbitrate before the instant petition to compel arbitration was filed.

(St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1200-03 [bold emphasis added].)

Here, Paramount’s Complaint, First Amended Complaint (“1AC”), and Second Amended Complaint (“2AC”) did not seek to litigate arbitrable causes of action. Paramount’s Complaint, 1AC and 2AC sought to recover for Cabir’s alleged misappropriation of trade secrets solicitation of Paramount employees, and to enforce the Confidential Information and Non-Solicitation Agreement executed by Shantelle Cabir on May 16, 2019, which does not contain an arbitration clause (Exh. A to original Complaint, 1AC and 2AC).

On the other hand, Paramount now seeks to enforce the Binding Arbitration Agreement, pertaining to the Independent Contractor Commission Agreement, executed by Shantelle Cabir on May 6, 2019[1] (Declaration of Chad D. Bernard, Exh. 1.) It was not until Cabir filed her Cross-Complaint on August 17, 2020 that the Independent Contractor Commission Agreement was placed at issue in this litigation. The heart of Cabir’s Cross-Complaint is that Paramount misclassified insurance agents as independent contractors instead of their true employee status, (Cabir Cross-Complaint, ¶¶ 2, 3, 4.) Cabir’s Cross-Complaint alleges that, around April 2018, Cross-Defendant Cohen required Cabir to sign an updated Independent Contractor Commission Agreement, which was backdated without Cabir’s knowledge by copying her signature from another company document on file. (Cross-Complaint, ¶ 19.) Cabir alleges that she was terminated for complaining about misclassification as an independent contractor and wrongful withholding of her earned compensation. (Cabir Cross-Complaint, ¶ 25.) Cabir’s Cross-Complaint is for wage and hour violations due to misclassification of class members as independent contractors, and retaliatory termination of Cabir’s employment. Indeed, the class is defined as those individuals who signed an Independent Contractor Commission Agreement with Cross-Defendants at any time from August 17, 2016 through the date of notice to the class. (Cabir Cross-Complaint, ¶ 29.)

As such, Cabir’s Cross-Complaint introduced for the first time the issue of the Independent Contractor Commission Agreement, as to which the Binding Arbitration Agreement which Paramount now seeks to enforce pertains.

After Cabir filed her Cross-Complaint on August 17, 2020, Paramount and Kohen filed a motion to compel arbitration. Thereafter, Paramount filed a Second Amended Complaint on November 25, 2020, and filed this amended motion to compel arbitration on December 23, 2020. The Court does not find that Paramount’s litigation activities pertaining to its case-in-chief constituted actions inconsistent with the right to arbitrate the claims asserted in Cabir’s Cross-Complaint. Nor was the litigation machinery substantially invoked as to the claims set forth in Cabir’s Cross-Complaint, and it cannot be said that Paramount took advantage of judicial discovery not available in arbitration to gain insight as to Cabir’s strategy’s relative to Cabir’s Cross-Complaint. The costs of litigation which Cabir and Newfront incurred prior to Cabir filing her Cross-Complaint do not weigh in favor of a finding of waiver. In this regard, the Court does not find that Cabir or Newfront suffered prejudice from the three-month delay between the time Cabir filed her Cross-Complaint and Paramount first filed the motion to compel arbitration.

As such, the Court finds that Paramount has not waived right to compel arbitration.

Existence of Agreement To Arbitrate

Under California law, arbitration agreements are valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract. (Blake v. Ecker (2001) 93 Cal.App.4th 728, 741 (overruled on other grounds by Le Francois v. Goel (2005) 35 Cal.4th 1094).) A party petitioning to compel arbitration has the burden of establishing the existence of a valid agreement to arbitrate and the party opposing the petition has the burden of proving, by a preponderance of the evidence, any fact necessary to its defense. (Banner Entertainment, Inc. v. Superior Court (1998) 62 Cal.App.4th 348, 356-57.)

Paramount seeks to enforce the Binding Arbitration Agreement, pertaining to the Independent Contractor Commission Agreement, executed by Shantelle Cabir on May 6, 2019[2] (Declaration of Chad D. Bernard, Exh. 1.) That Agreement is between Paramount Exclusive Insurance Services, Inc. and Shantelle Cabir, effective May 5, 2019, executed by the parties on May 6, 2019, and reads as follows:

Any controversy, claim or dispute between [sic] arising out of or with respect to the Independent Contractor Commission Agreement or its breach, termination, enforceability, or validity, including the determination of the scope or applicability of this Agreement to arbitrate, or between the Parties or their work relationship shall be adjudicated by binding arbitration before a single, neutral arbitrator who shall be a retired superior court judge mutually acceptable to the Parties. The arbitrator shall be selected in accordance with rules adopted by JAMS and in effect at the time of the dispute. Discovery shall be allowed pursuant to the rules of JAMS. No appeal shall lie from the arbitration award rendered by the arbitrator, and the award may be confirmed as a judgment in any Court of competent jurisdiction. This Agreement shall be construed and controlled by the laws of the State of California, and the parties’ further consent to jurisdiction by the state and federal courts sitting in the State of California, County of Los Angeles. Any appointed arbitrator shall have the right to award attorneys’ fees to the prevailing party, though the fees for the arbitration shall be shared equally between the Parties, with each Party to bear its own attorneys’ fees.

(Bold emphasis added.)

As also noted above, the heart of Cabir’s Cross-Complaint is that Paramount misclassified insurance agents as independent contractors instead of their true employee status, and around April 2018 Cross-Defendant Cohen required Cabir to sign an updated Independent Contractor Commission Agreement, which was backdated without Cabir’s knowledge by copying her signature from another company document on file. Cabir’s Cross-Complaint is for wage and hour violations due to misclassification of class members as independent contractors who signed an Independent Contractor Commission Agreement with Cross-Defendants, and retaliatory termination of Cabir’s employment. Cabir’s claims arise out of or are with respect to the Independent Contractor Commission Agreement, and the parties’ work relationship of independent contractor or employee/employer. As such, the claims in Cabir’s Cross-Complaint come within the scope of the arbitration clause set forth in the Binding Arbitration Agreement.

The Court notes that, as discussed above, Paramount’s Complaint, 1AC and 2AC pertained to Cabir’s alleged misappropriation of trade secrets solicitation of Paramount employees, and to enforce the Confidential Information and Non-Solicitation Agreement executed by Shanelle Cabir on May 16, 2019, which does not contain an arbitration clause (Exh. A to original Complaint, 1AC and 2AC). Moreover, Paramount’s claims do not arise out of or pertain to the terms of the Independent Contractor Agreement or the parties’ work relationship.

Although moving party Shawn Kohen is not a signatory to the Binding Arbitration Agreement, Cabir is equitably estopped from denying that Kohen may enforce the arbitration agreement against Cabir. (Jenks v. DLA Piper Rudnick Gray Cary US LLP (2015) 243 Cal.App.4th 1, 8-9.) Cabir’s Cross-Complaint alleges that Kohen, as Chief Executive Officer and President with Paramount, directed, implemented and ratified the policies and practices alleged in the Cross-Complaint. (Cabir Cross-Complaint, ¶ 9.) Indeed, Kohen is the one who allegedly forced Cabir to sign an updated Independent Contractor Commission Agreement, and who allegedly backdated the document without Cabir’s knowledge. (Cabir Cross-Complaint, ¶ 19.)

“Nonsignatory defendants may enforce arbitration agreements ‘where there is sufficient identity of parties.’ [Citation.] Enforcement is permitted where the nonsignatory is the agent for a party to the arbitration agreement [citation], or the nonsignatory is a third party beneficiary of the agreement [*9] [citation]. In addition, a nonsignatory may enforce an arbitration agreement under the doctrine of equitable estoppel. The doctrine applies where, for example, a signatory plaintiff sues a nonsignatory defendant for claims that are based on an underlying contract. In such instance, the plaintiff may be equitably estopped to deny the nonsignatory defendant's right to enforce an arbitration clause that is contained within the contract that the plaintiff has placed at issue.” (Marenco, supra, 233 Cal.App.4th at p. 1417.)

(Jenks v. DLA Piper Rudnick Gray Cary US LLP (2015) 243 Cal.App.4th 1, 8-9.)

Accordingly, moving parties Paramount and Kohen are entitled to enforce the Binding Arbitration Agreement against Cabir as to the claims asserted in Cabir’s Cross-Complaint.

The burden shifts to Cabir to demonstrate that the arbitration agreement in unenforceable.

Cabir argues that the arbitration agreement is unconscionable.

The doctrine of unconscionability was summarized in Walnut Producers of California v. Diamond Foods, Inc. (2010) 187 Cal.App.4th 634, 645-48 as follows:

“ ‘To briefly recapitulate the principles of unconscionability, the doctrine has “ ‘both a “procedural” and a “substantive” element,’ the former focusing on ‘ “oppression” ’ or ‘ “surprise” ’ due to unequal bargaining power, the latter on ‘ “overly harsh” ’ … or ‘ “one-sided” ’ results.” [Citation.] The procedural element of an unconscionable contract generally takes the form of a contract of adhesion, “ ‘which, imposed and drafted by the party of superior bargaining strength, relegates to the subscribing party only the opportunity to adhere to the contract or reject it.’ ” … [¶] Substantively unconscionable terms may take various forms, but may generally be described as unfairly one-sided.’ [Citation.]” (Citation omitted.) “Under this approach, both the procedural and substantive elements must be met before a contract or term will be deemed unconscionable. Both, however, need not be present to the same degree. A sliding scale is applied so that ‘the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa.’ (Citations omitted.)

(Bold emphasis added.)

“The procedural element of the unconscionability analysis concerns the manner in which the contract was negotiated and the circumstances of the parties at that time. [Citation.] The element focuses on oppression or surprise. [Citation.] ‘Oppression arises from an inequality of bargaining power that results in no real negotiation and an absence of meaningful choice.’ [Citation.] Surprise is defined as ‘ “the extent to which the supposedly agreed-upon terms of the bargain are hidden in the prolix printed form drafted by the party seeking to enforce the disputed terms.” ’ [Citation.]” (Citation omitted.) Plaintiffs claim the Agreement is procedurally unconscionable because it is an adhesion contract. An adhesion contract is “a standardized contract … imposed upon the subscribing party without an opportunity to negotiate the terms.” (Citation omitted.) “The term signifies a standardized contract, which, imposed and drafted by the party of superior bargaining strength, relegates to the subscribing party only the opportunity to adhere to the contract or reject it. [Citation.]” (Citation omitted.) The California Supreme Court has consistently stated that “ ‘[t]he procedural element of an unconscionable contract generally takes the form of a contract of adhesion … .’ ” (Citations omitted.) “Whether the challenged provision is within a contract of adhesion pertains to the oppression aspect of procedural unconscionability. A contract of adhesion is ‘ “ ‘ “imposed and drafted by the party of superior bargaining strength” ’ ” ’ and ‘ “ ‘ “relegates to the subscribing party only the opportunity to adhere to the contract or reject it.” ’ ” ’ (Citations omitted.) “[A]bsent unusual circumstances, use of a contract of adhesion establishes a minimal degree of procedural unconscionability notwithstanding the availability of market alternatives.” (Citation omitted.)

(Walnut Producers of California, supra, 187 Cal.App.4th at 645-46 [bold emphasis added].)

Cabir argues that the arbitration agreement is a contract of adhesion because it was imposed as a condition of employment, and was presented on a “take it or leave it” basis with no opportunity for negotiation. (Declaration of Shantelle Cabir, ¶¶ 2, 3.) Assuming this to be true, where an arbitration provision presented in a contract of adhesion is highlighted for an employee—here, the arbitration agreement was a separate document signed by Cabir—any procedural unconscionability is limited. (Serafin v. Balco Properties Ltd., LLC (2015) 235 Cal.App.4th 165, 179.)

Procedural unconscionability exists when the stronger party drafts the contract and presents it to the weaker party on a “take-it-or-leave-it basis.” (Ajamian, supra, 203 Cal.App.4th at p. 796.) Here, the arbitration agreement indisputably is a form contract of adhesion, which was presented to Serafin on a “take-it-or-leave-it basis.” (Ibid.) However, the fact that the arbitration agreement is an adhesion contract does not render it automatically unenforceable as unconscionable. Courts have consistently held that the requirement to enter into an arbitration agreement is not a bar to its enforcement. (Legatree v. Luce, Forward, Hamilton & Scripps (1999) 74 Cal.App.4th 1105, 1127 [88 Cal.Rptr.2d 664] [“[T]he cases uniformly agree that a compulsory predispute arbitration agreement is not rendered unenforceable just because it is required as a condition of employment or offered on a ‘take it or leave it’ basis.”]; Graham v. Scissor-Tail, Inc. (1981) 28 Cal.3d 807, 817–818 [171 Cal. Rptr. 604, 623 P.2d 165] (Graham) [such adhesion contracts are an “inevitable fact of life for all citizens—business[person], and consumer alike” (fns. omitted)]; Guiliano v. Inland Empire Personnel, Inc. (2007) 149 Cal.App.4th 1276, 1292 [58 Cal.Rptr.3d 5] [“ ‘[T]he compulsory nature of a predispute arbitration agreement does not render the agreement unenforceable on grounds of coercion or for lack of voluntariness.’ [Citation.]”].) In fact, where the arbitration provisions presented in a contract of adhesion are highlighted for the employee, any procedural unconscionability is “limited.” (Roman, supra, 172 Cal.App.4th at p. 1471 [limited procedural unfairness where the arbitration agreement “was contained on the last page of a seven-page employment application, underneath the heading ‘Please Read Carefully …’ ”].) Here, the arbitration provisions were unquestionably highlighted for Serafin in the two-page, freestanding document, relating solely to arbitration, that she received and signed.

(Serafin v. Balco Properties Ltd., LLC (2015) 235 Cal.App.4th 165, 179.)

Cabir also argues that she was not provided with a copy of the JAMS rules that would govern a potential arbitration (Cabir Decl., ¶ 4), and it is unclear whether the JAMS Employment Arbitration Rules and Procedures or JAMS Comprehensive Arbitration Rules and Procedures would apply. The failure to attach the applicable rules—here JAMS—which are clearly referenced in the arbitration agreement and available on the internet does not present notable procedural unconscionability because there is no surprise. (Lane v. Francis Capital Management LLC (2014) 224 Cal. App. 4th 676, 691-92.) Cabir fails to explain the different between possible applicable JAMS rules which would cause her surprise.

Here, we conclude the failure to attach a copy of the AAA rules did not render the agreement procedurally unconscionable. There could be no surprise, as the arbitration rules referenced in the agreement were easily accessible to the parties—the AAA rules are available on the Internet. (See Boghos v. Certain Underwriters at Lloyd's of London (2005) 36 Cal.4th 495, 505, fn. 6 [30 Cal. Rptr. 3d 787, 115 P.3d 68] [full, up-to-date text of AAA rules is available on AAA's Internet site]). In addition, Lane—a formerly well-paid professional analyst—does not appear to lack the means or capacity [*692] to locate and retrieve a copy of the referenced rules. Finally, the arbitration agreement at issue clearly specified a particular set of AAA rules, and it did not modify those rules in any manner. In the absence of oppression or surprise, we decline to find the failure to attach a copy of the AAA rules rendered the agreement procedurally unconscionable. (Cf. Dotson v. Amgen, Inc. (2010) 181 Cal.App.4th 975, 981 [104 Cal. Rptr. 3d 341] [“Dotson is not an uneducated, low-wage employee without the ability to understand that he was agreeing to arbitration. He was the opposite—a highly educated attorney, who knowingly entered into a contract containing an arbitration provision in exchange for a generous compensation and benefits package. In such circumstances, the courts have found a minimum degree of procedural unconscionability.”].)

(Lane v. Francis Capital Management LLC (2014) 224 Cal. App. 4th 676, 690-692.)

As such, the Court finds there to be slight procedural unconscionability based on the adhesive nature of the arbitration agreement. Under the sliding scale approach, then, Cabir must demonstrate a substantial degree of substantive unconscionability.

“A provision is substantively unconscionable if it ‘involves contract terms that are so one-sided as to “shock the conscience,” or that impose harsh or oppressive terms.’ [Citation.] The phrases ‘harsh,’ ‘oppressive,’ and ‘shock the conscience’ are not synonymous with ‘unreasonable.’ Basing an unconscionability determination on the reasonableness of a contract provision would inject an inappropriate level of judicial subjectivity into the analysis. ‘With a concept as nebulous as “unconscionability” it is important that courts not be thrust in the paternalistic role of intervening to change contractual terms that the parties have agreed to merely because the court believes the terms are unreasonable. The terms must shock the conscience.’ [Citations.]” (Citation omitted

(Walnut Producers of California, supra, 187 Cal.App.4th at 647-48.)

Cabir does not address substantive unconscionability, per se, but instead addressed the Armendariz factors. The Court will thus address those factors:

Armendariz Factors:

Where a party seeks to arbitrate nonwaivable statutory civil rights in the workplace, such as the wage and hour and FEHA claims as are involved here, there are:

five minimum requirements for the lawful arbitration of such rights pursuant to a mandatory employment arbitration agreement. Such an arbitration agreement is lawful if it "(1) provides for neutral arbitrators, (2) provides for more than minimal discovery, (3) requires a written award, (4) provides for all of the types of relief that would otherwise be available in court, and (5) does not require employees to pay either unreasonable costs or any arbitrators' fees or expenses as a condition of access to the arbitration forum. Thus, an employee who is made to use arbitration as a condition of employment 'effectively may vindicate [his or her] statutory cause of action in the arbitral forum.' " (Citation omitted.)

(Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal. 4th 83, 102.)

(1) Neutral arbitrators:

The arbitration agreement provides that the arbitrator shall be a neutral retired superior court judgment mutually acceptable to the Parties, selected in accordance with rules adopted by JAMS and in effect at the time of the dispute. Cabir does not explain why this would not lead to selection of a neutral arbitrator.

This requirement is satisfied.

(2) More than minimal discovery:

“Adequate discovery is indispensable for the vindication of statutory claims. (Citation omitted.) “ ‘[A]dequate’ discovery does not mean unfettered discovery … .” (Citation omitted.) And parties may “agree to something less than the full panoply of discovery provided in Code of Civil Procedure section 1283.05.” (Citation omitted.) However, arbitration agreements must “ensure minimum standards of fairness” so employees can vindicate their public rights. (Citation omitted).” (Fitz v. NCR Corp. (2004) 118 Cal.App.4th 702, 715-16 [bold emphasis added].)

The arbitration agreement provides that discovery shall be allowed pursuant to the rules of JAMS. Cabir does not explain why this would be less than minimal discovery.

This requirement is satisfied.

(3) Written award:

Although the arbitration agreement does not specify that the arbitrator must issue a written award, this requirement is implied. (Sanchez v. Western Pizza Enterprises, Inc. (2009) 172 Cal.App.4th 154, 176.)

Armendariz held that to the extent that the arbitration agreement was silent on these issues, these requirements must be implied as a matter of law. (Armendariz, supra, 24 Cal.4th at pp. 106, 107, 113 [interpreted the agreement to provide for adequate discovery, a written arbitration award, and the employer's payment of arbitration costs].) To the extent that the agreement expressly limited these rights, Armendariz held that the agreement was contrary to public policy and unenforceable. (Id. at p. 104 [stated that a provision limiting damages was unlawful].)

(Sanchez v. Western Pizza Enterprises, Inc. (2009) 172 Cal.App.4th 154, 176 [bold emphasis added].)

This requirement is satisfied.

(4) All types of relief available in court:

The arbitration agreement does not specify the type of relief which is available. As such, the availability of all types of relief available in court is implied. (Sanchez, supra, 172 Cal.App.4th at 176.)

This requirement is satisfied.

(5) Does not require employee to pay unreasonable costs or any arbitrator’s fees or expenses as a condition to access to arbitration:

Here, the agreement requires that the fees for arbitration shall be shared equally between the parties, with each party to bear its own attorney’s fees, subject to the arbitrator to award attorneys’ fees to the prevailing party. This provision is substantively unconscionable because it imposes arbitration costs upon Cabir which she would not have to bear when bringing an action in court. (Performance Team Freight Systems, Inc. v. Aleman (2015) 241 Cal.App.4th 1233, 1247.)

The subject agreements contain terms that would support a finding of substantive unconscionability. The arbitration provision requires that costs of arbitration be shared equally by the parties. A provision can be substantively unconscionable if it imposes arbitration costs on an employee or similarly situated claimant that he or she would not bear when bringing the action in court. (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 110 [99 Cal. Rptr. 2d 745, 6 P.3d 669]; Carlson v. Home Team Pest Defense, Inc. (2015) 239 Cal.App.4th 619, 636 [191 Cal. Rptr. 3d 29] (Carlson).)

(Performance Team Freight Systems, Inc. v. Aleman (2015) 241 Cal.App.4th 1233, 1247.)

This requirement is not satisfied.

However, this appears to be the only substantively unconscionable provision in the Agreement to Arbitrate. Case law holds that severance of such a provision is within the Court’s discretion. As to the appropriateness of severing the unconscionable portion of an arbitration agreement, instead of refusing to enforce the entire arbitration agreement, the Court is guided by the interests of justice. (Wherry v. Award, Inc. (2011) 192 Cal.App.4th 1242, 1250; Roman v. Superior Court (2009) 172 Cal.App.4th 1462, 1478.)

Relying on Civil Code section 1670.5, subdivision (a), defendants argue we may simply sever the unconscionable provisions and enforce the remainder of the agreement. That section does give the court the discretion to do so but it also authorizes the court to reject the entire agreement. In determining whether to sever, the court must consider the interests of justice. (Armendariz, supra, 24 Cal.4th at p. 124.) “[M]ultiple defects [in an agreement] indicate a systematic effort to impose arbitration on [a weaker party] … as an inferior forum that works to [the stronger party's] advantage.” (Ibid.) Here, based on the several unconscionable provisions detailed above “the arbitration agreement is so ‘ “permeated” by unconscionability [it] could only be saved, if at all, by a reformation beyond our authority.’ [Citations.]” (Martinez v. Master Protection Corp. (2004) 118 Cal.App.4th 107, 119 [12 Cal. Rptr. 3d 663].)

We agree with defendants that the general rule does favor arbitration and terms should be interpreted liberally (Gravillis v. Coldwell Banker Residential Brokerage Co. (2006) 143 Cal.App.4th 761, 771 [49 Cal. Rptr. 3d 531]), but when the agreement is rife with unconscionability, as here, the overriding policy requires that the arbitration be rejected (Armendariz, supra, 24 Cal.4th at p. 127).

(Wherry v. Award, Inc. (2011) 192 Cal.App.4th 1242, 1250 [bold emphasis added].)

In Armendariz, supra, 24 Cal.4th 83 the court found two factors weighed against severance of the unlawful provisions. First, the arbitration provision contained “more than one unlawful provision,” suggesting a “systematic effort to impose arbitration on an employee not simply as an alternative to litigation, but as an inferior forum that works to the employer's advantage.” (Id. at pp. 124–125.) Second, the agreement's lack of mutuality permeated the entire agreement, requiring not just severance of the provision, but a reformation and augmentation of the agreement. (Ibid.) Neither factor is present here. Accordingly, we have little difficulty concluding the interests of justice would be furthered by severance of the cost provision, which, if unconscionable (that is, if the 1997 AAA rules apply), is plainly “collateral to the main purpose of the contract.” (Armendariz, at p. 124.) Once that provision is severed from the agreement, the costs of the arbitration are properly imposed on Flo-Kem. (See id. at p. 113 [“a mandatory employment arbitration agreement that contains within its scope the arbitration of FEHA claims impliedly obliges the employer to pay all types of costs that are unique to arbitration”].)

(Roman v. Superior Court (2009) 172 Cal.App.4th 1462, 1478 [bold emphasis added].)

The Court finds that severance of the provision requiring Cabir to pay half of the arbitration fees is in the interest of justice. Consequently, the obligation that Paramount bear all of the arbitration fees and costs will be implied. (Sanchez, supra, 172 Cal.App.4th at 176.)

Finally, Cabir argues that Paramount does not view the agreement as mutual because it interprets the arbitration provision to apply only to Cabir’s claims, but not as to Paramount’s claims against Cabir and Newfront. For the reasons discussed above, the Court agrees with Paramount’s position.

The Court does not find under the sliding scale approach, that substantive unconscionability exists which renders the arbitration agreement unenforceable. Accordingly, moving Defendants Paramount and Kohen are entitled to enforce the agreement to arbitrate as to all claims being asserted by Cabir in her Cross-Complaint.

Re: CCP § 1281.2(c)—Existence of Non-Parties To The Arbitration Agreement

Cabir argues that Koehn is not a party to the arbitration agreement. This argument is addressed above.

Cabir also argues that Newfront is not a party to the arbitration agreement, and thus the Court may properly deny arbitration because Newfront is a third party as to whom the same transaction or series of transactions arises and there is a possibility of conflicting rulings on common issues of law or fact. (Code Civ. Proc., § 1281.2(c).)

However, as discussed above, Cabir’s Cross-Complaint is based upon wage and hour violations and termination for complaining about misclassification. Such claims are conceptually distinct—and severable—from the claims asserted by Paramount in its 2AC (see discussion above), as well as the claims asserted by Newfront in its Cross-Complaint against Paramount and Kohen alleging that Plaintiff Paramount pressured, induced and exploited third-party insurance carriers and insurance service providers to boycott Newfront either by terminating Newfront’s appointment or relationship based on falsehoods or to refuse Broker of Record letters signed by the insureds and submitted on Newfront’s behalf by Cabir. It is possible for the claims set forth in Cabir’s Cross-Complaint to be arbitrated without the risk of conflicting rulings on Paramount’s 2AC and Newfront’s Cross-Complaint. The Court does not find that CCP § 1281.2(c) applies here.

Moreover, because the arbitration agreement is silent on class arbitration, only Cabir’s individual claim may be arbitrated. (Cortez v. Doty Bros. Equipment Co. (2017) 15 Cal.App.5th 1, 15-16.)

The question whether an arbitration agreement authorizes arbitration of class action claims is also a matter of contract interpretation. Absent language in the arbitration provision itself or extrinsic evidence establishing the parties' agreement to arbitrate classwide claims, only individual claims may be arbitrated. Silence on the issue may not be construed as agreement. [*16] (See Stolt-Nielsen S. A. v. AnimalFeeds Int'l Corp. (2010) 559 U.S. 662, 684–685 [176 L.Ed.2d 605, 130 S.Ct. 1758] [“a party may not be compelled under the FAA [Federal Arbitration Act] to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so”; agreement to authorize class-action arbitration may not be inferred solely from the fact of the parties' agreement to arbitrate]; Sandquist v. Lebo Automotive, Inc. (2016) 1 Cal.5th 233, 243 [205 Cal. Rptr. 3d 359, 376 P.3d 506] [same].)

(Cortez v. Doty Bros. Equipment Co. (2017) 15 Cal.App.5th 1, 15-16.)

However, there is no basis to outright strike or dismiss the class action allegations from the Cross-Complaint at this time. As such, the Court orders the class action allegations severed from Cabir’s Cross-Complaint, and stays this litigation as to the class action allegations in Cabir’s Cross-Complaint only[3]. “If the issue which is the controversy subject to arbitration is severable, the stay may be with respect to that issue only.” (Code Civ. Proc., § 1281.4.)

Litigation will proceed as to Paramount’s trade secret, etc. claims and Newfront’s cross-claims for interference with contractual relations, etc.

Accordingly, Cross-Defendants’ motion to compel arbitration of Cabir’s Cross-Complaint is GRANTED. The Court orders the class action allegations severed from Cabir’s Cross-Complaint, and stays this litigation as to the class action allegations in Cabir’s Cross-Complaint only. (Code Civ. Proc., § 1281.4.) Litigation will proceed as to Paramount’s trade secret, etc. claims and Newfront’s cross-claims for interference with contractual relations, etc.


[1] Cabir alleges that this was actually signed in April 2018. (Cabir Cross-Complaint, ¶ 19.)

[2] Cabir alleges that this was actually signed in April 2018. (Cabir Cross-Complaint, ¶ 19.)

[3] Conceivably, if Plaintiff obtains relief in the arbitration, her qualification to act as class representative might be affected, which is an issue the parties may brief at the appropriate time.

Case Number: 20STCV20468    Hearing Date: October 08, 2020    Dept: 76

Plaintiff alleges that former-employee Defendant Shantelle Cabir utilized Plaintiff’s trade secrets to solicit Plaintiff’s customers on behalf of competitor Newfront Insurance Services.

Defendant Shantelle Cabir filed a Class Action Cross-Complaint alleging that the class of insurance agents was misclassified as independent contractors, and asserts wage and hour violations. Cabir also asserts individual claims for wrongful termination in retaliation for her complaints about being misclassified, and interference with contractual relations.

Defendants Shantelle Cabir and Newfront Insurance Services, LLC separately demur to the First Amended Complaint.

TENTATIVE RULING

Defendant Shantelle Cabir’s demurrer to the First Amended Complaint is OVERRULED as to the first, second, fourth, sixth, seventh and ninth causes of action and SUSTAINED with leave to amend as to the fifth cause of action.

Newfront Insurance Services, LLC’s demurrer to the First Amended Complaint is OVERRULED as to the first, third, and ninth causes of action, SUSTAINED with leave to amend as to the eighth cause of action and SUSTAINED without leave to amend as to the sixth cause of action.

Plaintiff is given 30 days leave to amend.

ANALYSIS

Defendant Shantelle Cabir’s Demurrer

Meet and Confer

The Declaration of Howard D. Ruddell reflects that the meet and confer requirement set forth in CCP § 430.41 was satisfied.

Request For Judicial Notice

Defendant Shantelle Cabir’s request that the Court take judicial notice of the Independent Contractor Commission Agreement entered into between Cabir and Paramount on January 1, 2020 is DENIED. This is not a matter of which the Court may take judicial notice pursuant to Evid. Code § 452.

On demurrer, judicial notice may be taken of documents which form the basis of the allegations in the complaint. (Ingram v. Flippo (1999) 74 Cal.App.4th 1280, 1285 n.3.)

Although there is case law approving of judicial notice where the operative complaint alleges selected portions of the contract (see Marina Tenants Assn. v. Deauville Marina Development Co.(1986) 181 Cal. App. 3d 122, 130; Align Technology, Inc. v. Tran (2009) 179 Cal. App. 4th 949, 955-956 n.6), the Independent Contractor Commission Agreement is not referred to in the 1AC. Defendant’s attempt to introduce this document is an attempt to introduce evidence extrinsic to the 1AC, which is not proper on a demurrer. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.)

“A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed (Code Civ. Proc., §§ 430.30, 430.70). The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action [citation].” (SKF Farms v. Superior Court (1984) 153 Cal. App. 3d 902, 905 [200 Cal. Rptr. 497].)

(Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.)

Discussion

1. First Cause of Action (Misappropriation of Trade Secrets).

Defendant argues that the First Amended Complaint (“1AC”) does not adequately allege the existence of a trade secret, does not allege facts supporting misappropriation of trade secrets, and does not allege actionable damages.

One who seeks protection against the use or disclosure of a trade secret must plead facts showing (1) the existence of subject matter which is capable of protection as a trade secret; (2) the secret was disclosed to the defendant, or to a person for whose conduct a defendant is liable, under circumstances giving rise to a contractual or other legally imposed obligation on the part of the disclose not to use or disclose the secret to the detriment of the discloser; and (3) if the defendant is an employee or former employee of the plaintiff or if the defendant is charged with having received the secret from an employee or former employee, the facts alleged must also show that the public policy in favor of the protection of the complainant's interest in maintaining the secret outweighs the interest of the employee in using his knowledge to support himself in other employment. (Compare Futurecraft Corp. v. Clary Corp. (1962) 205 Cal.App.2d 279, 285-288 [23 Cal.Rptr. 198], with Winston Research Corp. v. Minnesota Min. & Mfg. Co. (9th Cir. 1965) 350 F.2d 134, 137-138, 140.)

(Diodes, Inc. v. Franzen (1968) 260 Cal.App.2d 244, 250

Labor Code § 2860 provides:

Everything which an employee acquires by virtue of his employment, except the compensation which is due to him from his employer, belongs to the employer, whether acquired lawfully or unlawfully, or during or after the expiration of the term of his employment.

Case law addressing Labor Code § 2860 recognizes that confidential information pertaining to customers constitutes trade secrets. (Alex Foods, Inc. v. Metcalfe (1955) 137 Cal.App.2d 415, 423-24, 426-27; Reid v. Mass Co. (1957) 155 Cal.App.2d 293, 302; Wanke, Industrial, Commercial, Residential, Inc. v. Keck  (1959) 172 Cal.App.2d 117, 122.)

A customer list built up by the employer over a period of years is his property, and its use by a former employee for his own advantage will be enjoined. (California Intelligence Bureau v. Cunningham, 83 Cal.App.2d 197 [188 P.2d 303].) Equity will intervene to restrain an employee from divulging confidential information gained in the course of his employment or using such information to his employer's prejudice. . . . . . .

Regardless of the classification into which the facts herein mentioned bring this case, it is clear that if the continuance of an employer's trade depends on keeping secret the names of customers or other valuable information known to such employer, his employee, having gained knowledge of such secrets in the course of his employment, cannot thereafter utilize such knowledge to the prejudice of his former employer. Independent of an express contract, equity will enjoin the disclosure of confidential knowledge of trade secrets which a former employee learned in the course of his employment. The fact that a defendant was employed by plaintiff for years during which he learned the names, addresses, and requirements of plaintiff's customers justifies injunctive relief where the defendant undertook to use such information in unfair competition to the detriment of plaintiff. Such knowledge is a part of the good will of the business and is a trade secret. A list of customers is a trade secret if there is confidential information as to such customers. . . .

(Alex Foods, Inc. v. Metcalfe (1955) 137 Cal.App.2d 415, 423-24, 426-27 [bold emphasis and underlining added].)

It was the list of persons who did purchase plaintiffs' service that constituted confidential information. (California Intelligence Bureau v. Cunningham, supra, p. 203.) Plaintiffs expended considerable time, labor and money in building up a list of subscribers who accepted and subscribed to their unique advertising medium; this group of merchants would be more likely to purchase such a service since they had already been "sold" on its name as a method of advertising. And it is not necessary to show that the employee actually used such a list if he carried it in his mind or memory. (George v. Burdusis, supra, p. 160; Alex Foods, Inc. v. Metcalfe, supra, p. 425.) Defendants also argue that plaintiffs' salesmen were in the nature of independent contractors who chose their own customers and established the business relationship between the customer and the advertising service, thus negating the possibility of any confidential information. But it does not matter that the former employee may have originally secured the customer's business for the former employer; it is the identity of the customers who have been secured that constitutes the confidential information, and "the additional influence of the friendly contact of the former employee with the persons whose business he would carry to his new connection brings the solicitation within the condemnation of unfair competition." ( George v. Burdusis, supra, p.163; Wallich v. Koren, supra, p. 226.) While the identity of some of plaintiffs' subscribers may have been easily ascertainable by competitors, it cannot be said that the entire list of plaintiffs' subscribers (who were scattered all over the state) was "readily accessible to competitors." Moreover, even if the customer list does not in itself constitute such a trade secret as would warrant the court's intervention, the list becomes a trade secret when there is other confidential information as to the customers on the list. ( George v. Burdusis, supra, p. 160; Wallich v. Koren, supra, p. 226; Alex Foods, Inc. v. Metcalfe, supra, p. 427.) Only a few of plaintiffs' employees had access to the master chart which was kept for the purpose of determining the approximate expiration date of the contracts in a particular area. This information was a valuable asset since a salesman was more likely to obtain a subscription to the service he represented by approaching the subscriber when the latter's existing contract was about to expire.

(Reid v. Mass Co. (1957) 155 Cal.App.2d 293, 302 [bold emphasis and underlining added].)

“[C]ourts are reluctant to protect customer lists to the extent they embody information which is ‘readily ascertainable’ through public sources, such as business directories. [Citation.] On the other hand, where the employer has expended time and effort identifying customers with particular needs or characteristics, courts will prohibit former employees from using this information to capture a share of the market. Such lists are to be distinguished from mere identities and locations of customers where anyone could easily identify the entities as potential customers. [Citations.] As a general principle, the more difficult information is to obtain, and the more time and resources expended by an employer in gathering it, the more likely a court will find such information constitutes a trade secret. [Citation.]

“The requirement that a customer list must have economic value to qualify as a trade secret has been interpreted to mean that the secrecy of this information provides a business with a ‘substantial business advantage.’ [Citation.] In this respect, a customer list can be found to have economic value because its disclosure would allow a competitor to direct its sales efforts to those customers who have already shown a willingness to use a unique type of service or product as opposed to a list of people who only might be interested. [Citation.] Its use enables the former employee ‘to solicit both more selectively and more effectively.’ [Citation.]” (Morelife, supra, 56 Cal.App.4th at pp. 1521–1522.)

(Wanke, Industrial, Commercial, Residential, Inc. v. Keck (2012) 209 Cal.App.4th 1151, 1174-75 [bold emphasis added].)

A list of customers is a trade secret if there is confidential information as to such customers. To act upon it is an improper use of confidential information and amounts to unfair competition. . . .  Equitable protection may be invoked against the subsequent use by a former employee of knowledge of the 'peculiar likes and fancies and other characteristics' of the former employer's customers where such knowledge will aid him in securing and retaining their business. This rule applies generally to trade route cases as well as others involving a knowledge of the customers desired for specialized information, their preferences for certain products, and their buying habits. (Citation.)"

(Ingrassia v. Bailey (1959) 172 Cal.App.2d 117, 122.)

The 1AC alleges at ¶ 13:

Plaintiff, as a result of its advertising, marketing, promotion and sales activities, has comprehensive lists of customers and prospective customers, which lists include not only underwriting information pertaining to such customers, but also policy information such as policy expiration dates, policy renewal dates and premium information, specific product needs, and unique client preferences, all of which proprietary information is kept and maintained by Plaintiff in confidence in accordance with Plaintiff’s practice and intent, as well as in accordance with the requirements of the California Insurance Code. Among that confidential and protected information are (i) client lists (which contain the name of each client; the contact information for each client (including name, telephone and e-mail information); (ii) information concerning the unique needs and preferences of each client; (iii) financial data concerning the profitability of each client, including particularized revenue and expense information used to assess and evaluate the profitability of each policy of insurance and client which is thereafter used to make strategic decisions regarding marketing and sales; (iv) and strategic marketing and planning data used to target clients at specified times to increase sales. Said information has been carefully prepared and organized over time for use by Plaintiff to, among other things, efficiently and economically target its marketing and sales efforts to existing and prospective customers. That information has not been publicly released or disclosed by duly authorized representatives of Plaintiff. Said information derives independent economic value, actual or potential, from not being generally known to Plaintiff’s competitors or others skilled in the insurance business, the public or to other persons who can obtain economic value from its disclosure or use; and is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

(1AC, ¶ 13)(bold emphasis added.)

This is sufficient to plead the existence and identify of trade secrets.

As for misappropriation, Civil Code § 3426.1(b) provides in pertinent part:

(b) “Misappropriation” means:

. . .

(2) Disclosure or use of a trade secret of another without express or implied consent by a person who:

. . .

(B) At the time of disclosure or use, knew or had reason to know that his or her knowledge of the trade secret was:

. . .

(ii) Acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; . . .

(Civil Code § 3426.1.)

Here, ¶ 14 alleges that Defendant Cabir acknowledged, understood and agreed as a condition of working for Plaintiff that Defendant would be entrusted with the confidential, proprietary and valuable information set forth in ¶ 13. Defendant also allegedly agreed that she would not disclose any such information during the term of her work with Plaintiff or thereafter. (1AC, ¶ 14.) ¶ 15 alleges that Defendant Cabir printed out, downloaded and/or took with her Plaintiff’s comprehensive lists of customers and prospective customers, including underwriting information, policy information (including policy expiration dates, policy renewal dates and premium information), specific product needs, and unique client preferences. Thereafter, Defendants used Plaintiff’s trade secrets to divert and take away the prospective customers and current customers of Plaintiff. (Id.)

The foregoing facts are sufficient to plead “misappropriation” as that term is defined in Civil Code § 3426.1(b)(2), i.e., disclosure or use of a trade secret without Plaintiff’s consent, knowing she had acquired such trade secret under circumstances giving rise to a duty to maintain its secrecy or limit its use.

As for damages, Plaintiff has pled that it has suffered and will continue to suffer, losses in opportunities and business in an amount to be proven at trial. (¶ 22.) This is sufficient to plead damages, because even if Plaintiff cannot prove damages or unjust enrichment, payment of a reasonable royalty may be recovered per § 3426.3(b):

(a) A complainant may recover damages for the actual loss caused by misappropriation. A complainant also may recover for the unjust enrichment caused by misappropriation that is not taken into account in computing damages for actual loss.

(b) If neither damages nor unjust enrichment caused by misappropriation are provable, the court may order payment of a reasonable royalty for no longer than the period of time the use could have been prohibited.

(c) If willful and malicious misappropriation exists, the court may award exemplary damages in an amount not exceeding twice any award made under subdivision (a) or (b).

(Civ. Code § 3426.3 [bold emphasis added].)

The first cause of action is sufficiently pled.

The demurrer to the first cause of action is OVERRULED.

2. Second Cause of Action (Breach of Fiduciary Duty).

“The elements of a cause of action for breach of fiduciary duty are the existence of a fiduciary relationship, breach of fiduciary duty, and damages.” (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 820.)

Defendant argues that there is no basis for holding Defendant Cabir to a fiduciary standard. Defendant’s argument that Plaintiff expressly disclaimed any fiduciary agent relationship with Defendant in the independent contractor agreement relies upon the document as to which the Court has denied Defendant’s request for judicial notice.

Moreover, an independent contractor may still be considered an agent, with a corresponding duty of loyalty. (State Farm Mut. Auto. Ins. Co. v. Dempster (1959) 174 Cal.App.2d 418, 424.; Huong Que, Inc. v. Luu (2007) 150 Cal.App.4th 400, 410-11; Parallel Synthesis Techs. v. Derisi (N.D.Cal. Sep. 23, 2014, No. 5:13-cv-05968-PSG) 2014 U.S.Dist.LEXIS 134072, at **11-12.) At this stage of the litigation, whether Defendant was an agent with a corresponding duty of loyalty to Plaintiff is a question of fact. (Valentine v. Plum Healthcare Group, LLC (2019) 37 Cal.App.5th 1076, 1086.)

The Agents contend that the contract provides that only "records" and "supplies" "furnished to the Agent by the Companies" shall "remain the property of the Companies" and that this mandate does not apply to the business or information obtained by the Agents themselves. However, the  equitable protection extends to confidential trade information "whether prepared by the employer or by the employee." (1 Nims, The Law of Unfair Competition and Trade-Marks [4th ed., 1947], § 157, p. 436.) The reference to the employment relationship does not exclude the confidential relationship between independent contractors. (Gordon v. Landau (1958), 49 Cal.2d 690 [321 P.2d 56]; Ingrassia v. Bailey (1959), 172 Cal.App.2d 117 [341 P.2d 370].)

(State Farm Mut. Auto. Ins. Co. v. Dempster (1959) 174 Cal.App.2d 418, 424.)

The duty of loyalty arises not from a contract but from a relationship—here, the relationship of principal and agent. Agency is “the fiduciary relationship that arises when one person (a ‘principal’) manifests assent to another person (an ‘agent’) that the agent shall act on the principal's behalf and subject to the principal's control, and the agent manifests assent or  [*411]  otherwise consents so to act.” (Rest.3d Agency, § 1.01.) Where such a relationship arises, the agent assumes “a fiduciary duty to act loyally for the principal's benefit in all matters connected with the agency relationship.” (Id., § 8.01.)

(Huong Que, Inc. v. Luu (2007) 150 Cal.App.4th 400, 410-11.)

There is no dispute that while Baxter was an employee of Parallel he owed Parallel a duty of loyalty. Baxter's actions while he was an employee are therefore sufficiently alleged. The FAC also alleges that Baxter's post-employment actions are fair game because his duty of loyalty continued through his work for Parallel as an independent contractor. Less important than the "independent contractor" label are the substance of the role and the scope of responsibility. "[O]ne who contracts to act on behalf of another and subject to the others' control except with respect to his physical conduct is an agent and also an independent contractor." It is well-established law that a principal-agent relationship gives rise to an actionable claim for breach of duty of loyalty.

While Baxter's consulting relationship with Parallel may have been described as an independent contractor agreement, as alleged the [*12]  characteristics of Baxter's position did not change from those of his position as an employee: "Baxter continued to provide services to the company by further developing the company's proprietary imaging and analysis software and contacting vendors on the company's behalf. . . . Baxter continued to have unrestricted access to his company computer and email account, Parallel's office and facilities, and sensitive company information." Parallel's degree of control and Baxter's level of access suggests that even in his capacity as an independent contractor, Baxter was an agent that owed a fiduciary duty of loyalty to Parallel.

While the merits of Parallel's allegations remain to be determined, the allegations that Baxter's duty continued even as he continued to collude and ultimately plagiarize Parallel's trade secrets are sufficient to render Parallel's claim plausible. While Defendants characterize these allegations as mere legal conclusions, the court is satisfied Parallel lays out sufficient facts of the scheme to nudge Parallel's claim "across the line from conceivable." Parallel has therefore adequately pleaded its breach of duty of loyalty claim, rendering dismissal unwarranted.

(Parallel Synthesis Techs. v. Derisi (N.D.Cal. Sep. 23, 2014, No. 5:13-cv-05968-PSG) 2014 U.S.Dist.LEXIS 134072, at **11-12.)

As such, this argument is not persuasive on demurrer.

Defendant also attacks the allegation that Defendant failed to inform Plaintiff that Defendant had secured employment with a direct competitor, despite Plaintiff not being subject to a non-compete agreement. (1AC, ¶ 32.) However, securing employment with a direct competitor while still employed by Plaintiff, and actively assisting such competitor, would constitute a violation of the duty of loyalty. “The duty of loyalty embraces several subsidiary obligations, including the duty ‘to refrain from competing with the principal and from taking action on behalf of or otherwise assisting the principal's competitors’ (Rest.3d Agency, § 8.04)” (Huong Que, Inc. v. Luu (2007) 150 Cal.App.4th 400,416.)

In this regard, to the extent[1] the breach of duty of loyalty is independent of the misappropriation of any trade secrets, it is not preempted by the California Uniform Trade Secrets Act (“CUTSA”), as argued by Defendant. The preemption of the breach of fiduciary cause of action to the extent it is based upon trade secret appropriation should have been raised by a timely motion to strike.

Aside from contractual remedies (Civil Code, § 3426.7(b)[2]), the California Uniform Trade Secrets Act preempts all causes of action arising out of the same nucleus of facts regarding trade secret misappropriation. (Silvaco Data Systems v. Intel Corp. (2010) 184 Cal.App.4th 210, 232-241, superseded on other grounds in Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 337.) However, the “UTSA does not displace noncontract claims that, although related to a trade secret misappropriation, are independent and based on facts distinct from the facts that support the misappropriation claim. (Citations omitted.)” (Angelica Textile Services, Inc. v. Park (2013) 220 Cal.App.4th 495, 506.)

The preemption argument is not persuasive on demurrer.

The demurrer to the second cause of action is OVERRULED.

3. Fourth Cause of Action (Breach of Written Contract—Retaining Property and Confidential Information).

Defendant argues that there are insufficient facts pled demonstrating breach because the 1AC does not plead what information was retained or how much information was retained. To plead breach of contract, the complaint must allege: 1) existence of a contract; 2) plaintiff’s performance or excuse of non-performance; 3) defendant’s breach; and 4) resulting damage. (Wall Street Network, Ltd. v. N. Y. Times Co. (2008) 164 Cal.App.4th 1171, 1178.)

This cause of action is based upon the Confidential Information and Non-Solicitation Agreement attached to the 1AC as Exh. A. (1AC. ¶ 48.) Section 1.4 of the Agreement requires that when Defendant Cabir’s working relationship with Plaintiff ends, she must return all of Plaintiff’s property and confidential information, as specified at ¶ 49 of the 1AC. ¶ 52 alleges that Defendant breached Section 1.4 of the Agreement by retaining Plaintiff’s information. ¶ 15 specifies that Defendant allegedly printed out, downloaded and/or took with her Plaintiff’s comprehensive list of customers and prospective customers, including underwriting information, policy information (including policy expiration dates, policy renewal dates and premium information), specific product needs, and unique client preferences.

This cause of action sufficiently pleads the type of information Defendant retained. How much information Defendant allegedly retained is properly the subject of discovery.

The demurrer to the fourth cause of action is OVERRULED.

4. Fifth Cause of Action (Conversion).

Defendant argues that this cause of action is preempted by the CUTSA.

¶ 58 alleges that:

By engaging in the acts described above, Defendant retained property and confidential information belonging to Plaintiff, without permission or authorization, for her personal use and economic advantage. Such information that is the subject of this cause of action is not information defined as a trade secret under Civil Code section 3426.1(d).

However, the conclusion that the information that is the subject of this cause of action is not a trade secret need not be accepted as true for purposes of this demurrer. “Although a court must on demurrer accept as true properly pleaded facts, a demurrer does not admit contentions or conclusions of law or fact.” (Freeman v. San Diego Assn. of Realtors (1999) 77 Cal.App.4th 171, 185.)

Plaintiff does not differentiate between information which allegedly constitutes trade secrets for purposes of the first cause of action, and information which does not constitute trade secrets, but still constitutes property and confidential information belonging to Plaintiff for purposes of the fifth cause of action. Indeed, Plaintiff does not specify any personal property which Defendant took.

As such, it appears that the conversion cause of action is based on the same nucleus of facts as trade secret misappropriation, and is therefore preempted by the CUTSA. (Silvaco Data Systems, supra,184 Cal.App.4th at 232-33, 236.)

In K.C. Multimedia, Inc. v. Bank of America Technology & Operations, Inc. (2009) 171 Cal.App.4th 939, 962 [90 Cal.Rptr.3d 247], this court held that CUTSA “preempt[s] claims based on the same nucleus of facts as trade secret misappropriation.” Although the California version of the relevant provision is vexingly oblique, a legislative intent to supersede other grounds of civil liability does flow from statutory implication, context, legislative history, and general principles of statutory supersession.

We . . . reaffirm that CUTSA provides the exclusive civil remedy for conduct falling within its terms, so as to supersede other civil remedies “based upon misappropriation of a trade secret.” (§ 3426.7, subds. (a), (b).) The question then is whether Silvaco's claims fall within this description. It appears that with one exception (see pt. III.A., post), all of them do. The conversion cause of action, last pleaded in Silvaco's second (“first amended”) complaint, was predicated on “the conversion and use of SILVACO's property as described herein.” Likewise the claim entitled “Common Count” is predicated on Intel's having “obtained certain property … as alleged herein.” The count for common law unfair business practices was predicated on “Intel's conduct” as previously described in the pleading—i.e., its use of CSI software containing Silvaco trade secrets. In its last iteration of the claim for intentional and negligent misrepresentation, in the fifth complaint, Silvaco alleged in essence that Intel lied about its continuing use of CSI code, which use—according to Silvaco—constituted a misappropriation of trade secrets.

(Silvaco Data Systems, supra,184 Cal.App.4th at 232-33, 236.)

The demurrer to the fifth cause of action is SUSTAINED with leave to amend.

5. Sixth Cause of Action (Accounting).

Defendant argues that this cause of action fails because Cabir did not owe Plaintiff a fiduciary duty, and thus cannot be liable for an accounting. This argument is not persuasive. First, as discussed above, Defendant’s argument that she did not owe Plaintiff a fiduciary duty is not persuasive. Second, as a fiduciary duty is not an essential element of a cause of action for an accounting. (Teselle v. McLoughlin (2009) 173 Cal.App.4th 156, 179-180.)

[A] fiduciary relationship between the parties is not required to state a cause of action for accounting. All that is required is that some relationship exists that requires an accounting. (Citation omitted.) The right to an accounting can arise from the possession by the defendant of money or property which, because of the  [*180]  defendant's relationship with the plaintiff, the defendant is obliged to surrender.

(Teselle v. McLoughlin (2009) 173 Cal.App.4th 156, 179-180.)

The demurrer to the sixth cause of action is OVERRULED.

6. Seventh Cause of Action (Breach of Written Contract—Solicitation of Employees).

Defendant argues that the contractual non-solicitation provision is void under B & P Code § 16600.

The seventh cause of action is for breach of the Confidential Information and Non-Solicitation Agreement attached as Exh. A to the 1AC. The alleged breach occurred by virtue of Defendant Cabir inducing, soliciting, recruiting or encouraging Plaintiff’s employees and/or contractors to end their working relationship with Plaintiff and join her at Defendant Newfront Insurance Services in violation of Section 2.2 of the Agreement. (1AC, ¶ 74.)

As it pertains to Defendant’s alleged solicitation of Plaintiff’s employees, Section 2.2 provides in pertinent part:

2.2 Nonsolicitation. For one (1) year after termination of Contractor’s work relationship with Company, Contractor will not, either directly or indirectly, induce, solicit, recruit, or encourage any person employed by Company or contracted with Company to end their work relationship with Company.

(1AC, ¶ 71.)

Defendant cites AMN Healthcare, Inc. v. Aya Healthcare Services, Inc. (2018) 28 Cal.App.5th 923 for the proposition that nonsoliciation of employee provisions such as the above violate Business and Professions Code § 16600, which provides: “Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.”

The Court agrees with Plaintiff’s argument in the Opposition, however, that AMN Healthcare is distinguishable on its facts because, in that case, the profession at issue necessarily involved soliciting employees as part of the travel nurse recruiting business. (AMN Healthcare, Inc. v. Aya Healthcare Services, Inc. (2018) 28 Cal.App.5th 923, 936, 939.)

Section 16600 provides, “Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.” (Italics added.) This absolute bar on contractual restrictions repudiated the earlier, common law rule that allowed reasonable “restraints on the practice of a profession, business, or trade.” (Edwards v. Arthur Andersen LLP, supra, 44 Cal.4th at p. 945 (Edwards); see Galante, supra, 176 Cal.App.4th at pp. 1235–1236.) Thus, unless a contractual restraint falls into one of section 16600's three statutory exceptions (§§ 16601 [sale of goodwill or interest in a business], 16602 [dissolution of a partnership], or 16602.5 [dissolution or sale of limited liability company]), it ostensibly is void. (Dowell v. Biosense Webster, Inc. (2009) 179 Cal.App.4th 564, 578 [102 Cal. Rptr. 3d 1] (Dowell) [noting how California does not follow the Ninth Circuit's exception for “‘“narrow-restraint[s]”’” on practicing a profession].)

“Section 16600 expresses California's strong public policy of protecting the right of its citizens to pursue any lawful employment and enterprise of their choice. (Advanced Bionics Corp. v. Medtronic, Inc. (2002) 29 Cal.4th 697, 706 [128 Cal. Rptr. 2d 172, 59 P.3d 231]; Weber, Lipshie & Co. v. Christian (1997) 52 Cal.App.4th 645, 659 [60 Cal. Rptr. 2d 677] [‘section 16600 was adopted for a public reason’].) California courts ‘have consistently affirmed that section 16600 evinces a settled legislative policy in favor of open competition and employee mobility.’ (Edwards[, supra,] 44 Cal.4th [at p.] 946 … .) ‘The interests of the employee in his [or her] own mobility and [*936]  betterment are deemed paramount to the competitive business interests of the employers, where neither the employee nor his [or her] new employer has committed any illegal act accompanying the employment change.’ (Diodes, Inc. v. Franzen (1968) 260 Cal.App.2d 244, 255 [67 Cal. Rptr. 19]; see D'Sa v. Playhut, Inc. (2000) 85 Cal.App.4th 927, 933 [102 Cal. Rptr. 2d 495] (D'Sa).)” (Dowell, supra, 179 Cal.App.4th at p. 575.)

2. Analysis

Turning to the instant case, we independently conclude that the nonsolicitation of employee provision in the CNDA is void under section 16600. Indeed, the broadly worded provision prevents individual defendants, for a period of at least one year after termination of employment with AMN, from either “directly or indirectly” soliciting or recruiting, or causing others to solicit or induce, any employee of AMN. This provision clearly restrained individual defendants from practicing with Aya their chosen professionrecruiting travel nurses on 13-week assignments with AMN. (See Dowell, supra, 179 Cal.App.4th at p. 575 [finding a broadly worded nonsolicitation clause preventing employees from rendering any service to “any of the accounts, customers or clients with whom they had contact during their last 12 months of employment” void under § 16600]; D'Sa v. Playhut, Inc., supra, 85 Cal.App.4th at p. 930 [finding a provision in an employee confidentiality agreement was void under § 16600 because it prevented an employee from rendering “‘services, directly or indirectly, for a period of one year after separation of employment with [employer] to any person or entity in connection with any [c]ompeting [p]roduct’”]; Metro Traffic Control, Inc. v. Shadow Traffic Network (1994) 22 Cal.App.4th 853, 859 [27 Cal. Rptr. 2d 573] (Metro Traffic) [finding a broadly worded noncompetition provision void under § 16600 because it prevented an employee from working for a competitor for a period of one year after termination from the employer].)

(AMN Healthcare, Inc. v. Aya Healthcare Services, Inc. (2018) 28 Cal.App.5th 923, 935-36 [bold emphasis added].)

[I]n the instant case individual defendants were in the business If enforced, section 3.2 of the CNDA thus restrained individual defendants from engaging in their chosen profession, even in a “narrow” manner or a “limited” way. (See Edwards, supra, 44 Cal.4th at p. 948.) We thus independently conclude section 3.2 of the CNDA is void under section 16600.

(AMN Healthcare, Inc., supra, 28 Cal.App.5th 923, 939 [italics in original].)

On the other hand, contractual provisions which prohibit for a one-year period the solicitation of former co-workers does not restrain the former employee from engaging in a lawful profession, trade or business, at least where the profession is, itself, soliciting former co-workers, as it was in AMN Healthcare, Inc. (Bus. & Prof. Code § 16600.) Rather, such a provision which prevent a raid on the former employer’s business is not void on its face under B & P Code § 16600. (Loral Corp. v. Moyes (1985) 174 Cal.App.3d 268, 274-80.)

This restriction only slightly affects Conic employees. They are not hampered from seeking employment with Aydin nor from contacting Moyes. All they lose is the option of being contacted by him first. It does not restrain them from being employed by Aydin, contrary to defendant's argument. Equity will not enjoin a former employee from receiving and considering  [*280]  applications from employees of his former employer, even though the circumstances be such that he should be enjoined from soliciting their applications. (Cf., Aetna Bldg. Maintenance Co. v. West, supra, 39 Cal.2d 198 at p. 204.)

The restriction presumably was sought by plaintiffs in order to maintain a stable work force and enable the employer to remain in business. This restriction has the apparent impact of limiting Moyes' business practices in a small way in order to promote Conic's business. This noninterference agreement has no overall negative impact on trade or business. We hold that this contract, as construed, is not void on its face under Business and Professions Code section 16600.

(Loral Corp. v. Moyes (1985) 174 Cal.App.3d 268, 279-80.)

A fourth type of provision restricts an employee or former employee from soliciting the employer's other employees, i.e., approaching them for the purpose of encouraging them to leave their present employer for a competitor. Under California precedent, restrictions on the solicitation of employees are not necessarily treated in the same way as restrictions on the solicitation of customers. Specifically, in Loral Corp. v. Moyes, 174 Cal. App. 3d 268, 219 Cal. Rptr. 836 (1985), the California Court of Appeal upheld the validity of a provision prohibiting a former employee from "raiding" the company's employees. Id. at 274, 279-80As discussed in greater detail below, the Loral

(Thomas Weisel Ptnrs. LLC v. BNP Paribas (N.D.Cal. Feb. 9, 2010, No. C 07-6198 MHP) 2010 U.S.Dist.LEXIS 11626, at *12.)

Accordingly, the Court finds that the subject non-solicitation provision does not violate Business and Professions Code § 16600.

The demurrer to the seventh cause of action is OVERRULED.

7. Ninth Cause of Action (Violation of Business and Professions Code § 17200, et seq.)

Defendant argues that this cause of action is preempted by the CUTSA.

¶ 85 alleges that the allegations set forth at paragraphs 57 through 64 (conversion) and 69 through 84 (Breach of Contract—Solicitation of Employees and Aiding and Abetting) constitute unfair business practices in violation of B & P Code § 17200.

As discussed above, the conversion cause of action is preempted by the CUTSA[3]. However, noted above, the CUTSA does not preempt contractual remedies, and thus would not preempt the breach of contract cause of action for solicitation of employees. As this Court has ruled, the breach of contract cause of action for solicitation of employees is not void under B & P Code § 16600.

Defendant argues that a UCL action is equitable in nature and, thus, a breach of contract claim cannot serve as the basis for UCL claim. This argument is not persuasive. A systematic breach of contract which his unlawful, unfair or fraudulent, may form the bases for a UCL claim. (Arce v. Kaiser Foundation Health Plan, Inc. (2010) 181 Cal.App.4th 471, 489-90.)

A breach of contract in turn may form the predicate for a UCL claim, “ ‘provided it also constitutes conduct that is “unlawful, or unfair, or fraudulent.” ’ [Citations.]” (Puentes v. Wells Fargo Home Mortgage, Inc. (2008) 160 Cal.App.4th 638, 645 [72 Cal. Rptr. 3d 903].) With respect to the unfairness prong of Business and Professions Code section 17200, appellate courts have recognized that “a systematic breach of certain types of contracts (e.g., breaches of standard consumer or producer contracts involved in a class action) can constitute an unfair business practice under the UCL. [Citations.]” (Smith v. Wells Fargo Bank, N.A. (2005) 135 Cal.App.4th 1463, 1483 [38 Cal. Rptr. 3d 653]; see also State Farm Fire & Casualty Co. v. Superior Court (1996) 45 Cal.App.4th 1093, 1104 [53 Cal. Rptr. 2d 229], disapproved on other grounds in Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co., supra, 20 Cal.4th at pp. 184–185; Allied Grape Growers v. Bronco Wine Co. (1988) 203 Cal.App.3d 432, 451–453 [249 Cal. Rptr. 872]; Orkin Exterminating Co., Inc. v. F.T.C. (11th Cir. 1988) 849 F.2d 1354, 1367–1368.) Consequently, Arce's allegations that Kaiser systematically breached its health plan contract by refusing to provide all putative class members with contractually covered services is sufficient to state a class action claim under the UCL.

(Arce v. Kaiser Foundation Health Plan, Inc. (2010) 181 Cal.App.4th 471, 489-90.)

The demurrer to the ninth cause of action is OVERRULED.

Defendant Newfront Insurance Services, LLC’s Demurrer

Meet and Confer

The Form Declaration of Ian Stewart reflects that the meet and confer requirement set forth in CCP § 430.41 was satisfied.

Discussion

1. First Cause of Action (Misappropriation of Trade Secrets).

Defendant argues that the 1AC does not adequately allege the existence of a trade secret. For the reasons discussed above re: the demurrer of Defendant Cabir, the first cause of action is adequately pled. Further details are properly the subject of discovery. The Court does not that Defendant’s argument that “information like customer preferences would be known by the customer, it would not be a secret belonging to Paramount” (Ps and As, Page 8:23-24) misses the point. The customer is not the one using such information to sell insurance, and Defendant’s position goes against the concept that confidential information pertaining to customers constitutes trade secrets. (Alex Foods, Inc. v. Metcalfe (1955) 137 Cal.App.2d 415, 423-24, 426-27; Reid v. Mass Co. (1957) 155 Cal.App.2d 293, 302; Wanke, Industrial, Commercial, Residential, Inc. v. Keck

The demurrer to the first cause of action is OVERRULED.

2. Third Cause of Action (Aiding and Abetting Breach of Fiduciary Duty).

The third cause of action alleges that Defendant Newfront Insurance Services, LLC aided and abetted Defendant Cabir’s breach of fiduciary owed to Plaintiff by receiving and using Plaintiff’s trade secrets to its own advantage, when it knew or should have known that it should not possess that information. (1AC, ¶¶ 39-41.)

Defendant argues that this cause of action is preempted under the CUTSA, and that

Plaintiff has not alleged the existence of a fiduciary duty.

For the reasons discussed above re: the demurrer of Defendant Cabir as to the second cause of action, the Court does not find these arguments to be persuasive. Defendant cites Wolf v. Superior Court (2003) 107 Cal.App.4th 25, 29 for the proposition that a long-term independent contractor does not owe a fiduciary obligation. However, Wolf is distinguishable from the instant case because in Wolf, the Court found that the subject agreement created a debtor/creditor relationship relative to contingent entitlement to future compensation, which in turn did not create a fiduciary relationship. (Id. at 32-33.) Similar facts are not present in this case.

The demurrer to the third cause of action is OVERRULED.

3. Sixth Cause of Action (Accounting).

Defendant argues that this cause of action is preempted because it relies upon the first cause of action for trade secret misappropriation (which is not preempted—it is itself a claim under the CUTSA [see 1AC, ¶¶ 15, 18]), and the third cause of action for aiding and abetting a breach of fiduciary duty (which is preempted.) Defendant’s preemption argument is not persuasive.

Defendant also argue that there is no fiduciary duty or relationship between Defendant Newfront and Plaintiff. A complaint sufficiently states a claim for an accounting by alleging (1) a fiduciary relationship or contractual relationship requiring payment of profits received; (2) losses in an amount that cannot be ascertained; and (3) misconduct. See Kritzer v. Lancaster (1950) 96 Cal.App.2d 1, 6-7; McClain v. Octagon Plaza, LLC (2008) 159 Cal.App.4th 784.

Here, the 1AC does not plead facts that Defendant Newfront was ever in a fiduciary or contractual relationship with Plaintiff. At most, Defendant Newfront is a competitor who possibly caused damages to Plaintiff, which is insufficient to state a cause of action for an accounting.

The demurrer to the sixth cause of action is SUSTAINED without leave to amend, unless Plaintiff can demonstrate a reasonable possibility of successful amendment.

4. Eighth Cause of Action (Aiding and Abetting Breach of Written Contract—Solicitation of Employees).

Defendant argues that California does not recognize aiding and abetting a breach of contract, only torts. This argument is persuasive.

“A defendant is liable for aiding and abetting another in the commission of an intentional tort, . . . if the defendant “ ‘ “knows the other's conduct constitutes a breach of duty and gives substantial assistance or encouragement to the other to so act.” ’ ” (Citation omitted.)” (Nasrawi v. Buck Consultants LLC (2014) 231 Cal.App.4th 328, 343.)

The Court is unable to find any case reciting the elements of a cause of action for aiding and abetting a breach of contract. In the Opposition, Plaintiff argues that it is pleading a cause of action for inducing a breach of contract. This would be a cause of action for intentional interference with a contractual relationship, which was not pled. The Court will give Plaintiff an opportunity to properly plead such a cause of action.

Accordingly, the demurrer to the eighth cause of action is SUSTAINED with leave to amend, to plead a cause of action for intentional interference with a contractual relationship.

5. Ninth Cause of Action (Violation of Business and Professions Code § 17200, et seq.)

Defendant argues that this cause of action is preempted by the CUTSA and fails to plead restitutionary relief.

For the reasons discussed above re: the demurrer of Defendant Cabir, the Court finds that the ninth cause of action is not preempted by the CUTSA. Moreover, regardless of whether Plaintiff is entitled to restitution (disgorgement) of amount wrongfully obtained[4] (¶ 88), the ninth cause of action seeks injunctive relief against Defendants (1AC, ¶ 90), which is an available remedy under the UCL.

The demurrer to the ninth cause of action is OVERRULED.

Plaintiff is given 30 days leave to amend.


[1] “A demurrer must dispose of an entire cause of action to be sustained.” (Fremont Indemnity Co. v. Fremont General Corp. (2007) 148 Cal. App. 4th 97, 119.) A demurrer does not lie to only part of a cause of action or a particular type of damage or remedy. (See Kong v. City of Hawaiian Gardens Redevelopment Agency (2003) 108 Cal.App.4th 1028, 1046; PH II, Inc. v. Superior Court (Ibershof) (1995) 33 Cal.App.4th 1680, 1682.) The proper procedure is to bring a motion to strike the substantively defective allegation. (Id. at 1682-83.)

[2]

(b) This title does not affect (1) contractual remedies, whether or not based upon misappropriation of a trade secret, (2) other civil remedies that are not based upon misappropriation of a trade secret, or (3) criminal remedies, whether or not based upon misappropriation of a trade secret.

(Civ. Code § 3426.7(b).)

[3] “A demurrer must dispose of an entire cause of action to be sustained.” (Fremont Indemnity Co. v. Fremont General Corp. (2007) 148 Cal. App. 4th 97, 119.)

[4] Nonrestitutionary disgorgement of profits is not recoverable under the UCL. (Hambrick v. Healthcare Partners Medical Group, Inc. (2015) 238 Cal.App.4th 124, 157.)

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