You are on page 1of 32

Case4:10-cv-05471-SBA Document27 Filed12/27/10 Page1 of 32

1 QUINN EMANUEL URQUHART & SULLIVAN, LLP


Claude M. Stern (Bar No. 96737)
2 claudestern@quinnemanuel.com
Evette Pennypacker (Bar No. 203515)
3 evettepennypacker@quinnemanuel.com
Thomas R. Watson (Bar No. 227264)
4 tomwatson@quinnemanuel.com
555 Twin Dolphin Drive, 5th Floor
5 Redwood Shores, California 94065
Telephone: (650) 801-5000
6 Facsimile: (650) 801-5100

7 Attorneys for Defendant Halogen Software Inc.

9 UNITED STATES DISTRICT COURT

10 NORTHERN DISTRICT OF CALIFORNIA

11 OAKLAND DIVISION

12

13

14 SUCCESSFACTORS, INC., a Delaware CASE NO. 4:10-CV-05471-SBA


Corporation,
15 DEFENDANT HALOGEN SOFTWARE
Plaintiff, INC.’S NOTICE OF MOTION AND
16 MOTION TO DISMISS
vs.
17
HALOGEN SOFTWARE, INC., a Canadian DATE: March 29, 2011
18 Corporation, and DOES 1 through 5, inclusive, TIME: 1:00 p.m.
PLACE: Courtroom 1, 4th Floor
19 Defendants. JUDGE: Hon. Saundra Armstrong

20

21

22

23

24

25

26

27

28
04372.51777/3871926.4 Case No. :10-CV-05471-SBA
HALOGEN SOFTWARE INC.’S NOTICE OF
MOTION AND MOTION TO DISMISS
Case4:10-cv-05471-SBA Document27 Filed12/27/10 Page2 of 32

1 NOTICE OF MOTION AND MOTION

2 Please take notice that on March 29, 2011 at 1:00 p.m. in Courtroom 1, Fourth Floor of the

3 United States District Court for the Northern District of California, Oakland Division, 1301 Clay

4 Street, Oakland, CA, the Honorable Sandra B. Armstrong presiding, Defendant Halogen Software,

5 Inc. will, and hereby does, move to dismiss Plaintiff’s Complaint pursuant to Federal Rules of

6 Civil Procedure 12(b)(6), 12(e) and 9(b).

7 The basis for this motion is that (1) Plaintiff’s Complaint, including its claims for

8 intentional interference with prospective economic advantage, conversion, fraud and deceit, and

9 unfair competition, does not state a claim upon which relief can be granted because each are

10 superseded by California’s Uniform Trade Secret Act or otherwise fail to state a cognizable cause

11 of action, (2) Plaintiff’s intentional interference claim fails to allege a single relationship for which

12 Plaintiff expected an economic advantage, (3) Plaintiff’s conversion claim fails because the

13 allegedly misappropriated information is not subject to conversion and Plaintiff maintained copies

14 of the information, (4) Plaintiff’s fraud and deceit claim is not pled with particularity, and (5)

15 Plaintiff’s unfair competition claim is indefinite, unclear, vague and ambiguous with respect to

16 alleged statements made by Defendant to Plaintiff’s customers and to the public.

17 This motion is based on this Notice of Motion and Motion, the attached Memorandum of

18 Points and Authorities, the pleadings in this action, the accompanying Request for Judicial Notice,

19 and such other matters and argument as the Court may consider at the time of the hearing hereon.

20 CERTIFICATE OF MEET AND CONFER COMPLIANCE

21 On a December 20, 21, and 23, 2010, counsel for Halogen and SuccessFactors met and

22 conferred by email and on December 27 telephonically regarding the subject matter of this motion

23 and whether SuccessFactors would agree to file an Amended Complaint. The parties have been

24 unable to reach resolution or agreement.

25 STATEMENT OF ISSUES TO BE DECIDED

26 1. Does Plaintiff’s Complaint fail to state a claim for (i) Intentional Interference with

27 Prospective Economic Relations, (ii) Conversion, (iii) Fraud and deceit, and (v) Violations of Cal.

28 Bus. & Prof. Code §§ 17200, et seq. (“CUTSA”)?

04372.51777/3871926.4 Case No. :10-CV-05471-SBA


HALOGEN SOFTWARE INC.’S NOTICE OF MOTION
Case4:10-cv-05471-SBA Document27 Filed12/27/10 Page3 of 32

1 2. Does Plaintiff’s claim for Intentional Interference with Prospective Economic Relations

2 fail to state a cognizable cause of action because Plaintiff fails to allege (i) a relationship with

3 which it expected to receive an economic benefit, and (ii) harm.

4 3. Does Plaintiff’s Conversion claim fail to state a cognizable cause of action because (i)

5 Plaintiff’s intangible product and pricing information is not capable of an exclusive right to

6 possession or control, and (ii) Plaintiff has not been deprived of that information resulting in any

7 damages.

8 4. Does Plaintiff’s Fraud and deceit fail to state a cognizable cause of action because

9 Plaintiff (i) fails to plead a cognizable injury, and (ii) fails to allege fraud with the specificity

10 required by Rule 9(b)?

11 5. Does Plaintiff’s claims for violations of Cal. Bus. & Prof. Code §§ 17200, et seq. fail to

12 state a cognizable cause of action because (i) Plaintiff’s claim is unsupported without an

13 actionable unlawful act, (ii) Plaintiff has not alleged any actions that are likely to deceive the

14 public, and (iii) Plaintiff has not alleged any violation of antitrust or quasi-antitrust laws?

15 6. Does Plaintiff need to provide a more definite statement for its unfair competition claim

16 because Plaintiff fails to identify the “statements” Halogen allegedly made to SuccessFactors’

17 customers and to the public, and because the unfair competition claim rises and falls with

18 Plaintiff’s ability to state a cognizable cause of action?

19

20

21

22

23

24

25

26

27

28

04372.51777/3871926.4 Case No. :10-CV-05471-SBA


HALOGEN SOFTWARE INC.’S NOTICE OF MOTION
Case4:10-cv-05471-SBA Document27 Filed12/27/10 Page4 of 32

1 TABLE OF CONTENTS

2 MEMORANDUM OF POINTS AND AUTHORITIES .................................................................. 1

3 I. INTRODUCTION ................................................................................................................. 1

4 II. ALLEGED FACTS ............................................................................................................... 2

5 A.  The Parties ................................................................................................................. 2

6 B. SuccessFactors Freely Disseminated Its Product And Pricing Information to


The Magnus Group.................................................................................................... 2
7
C. SuccessFactors' Claims for Relief ............................................................................. 4
8
D. SuccessFactors’ Motion For Temporary Restraining Order ..................................... 5
9
III.  ARGUMENT ........................................................................................................................ 5
10
A.  Legal Standards ......................................................................................................... 5
11
B. SuccessFactors Has Not Stated and Cannot State a Claim for Trade Secret
12 Misappropriation. ...................................................................................................... 6

13 C. SuccessFactors' Tort Claims Are Preempted by the California Uniform


Trade Secrets Act. ..................................................................................................... 9
14
D. SuccessFactors’ Claims Fail To State A Cognizable Cause Of Action .................. 14
15
1.  SuccessFactors’ Intentional Interference With Prospective Economic
16 Relations Claim Fails To State A Cognizable Cause Of Action ................. 14

17 2. SuccessFactors’ Conversion Claim Fails To State A Cognizable


Cause Of Action .......................................................................................... 17
18
3. SuccessFactors’ Fraud And Deceit Claim Fails To State A
19 Cognizable Cause Of Action ....................................................................... 20

20 4. SuccessFactors’ Unfair Competition Claim Fails To State A


Cognizable Cause Of Action ....................................................................... 23
21
IV.  CONCLUSION ................................................................................................................... 25
22

23

24

25

26

27

28
04372.51777/3871926.4 Case No. :10-CV-05471-SBA
-i-
HALOGEN SOFTWARE INC.’S MEMORANDUM OF POINTS AND
AUTHORITIES IN SUPPORT OF MOTION TO DISMISS
Case4:10-cv-05471-SBA Document27 Filed12/27/10 Page5 of 32

1 TABLE OF AUTHORITIES
2 Page
3 Cases
4 Applied Elastomerics, Inc. v. Z-Man Fishing Prods., Inc.,
No. 06-2469, 2007 WL 703606 (N.D. Cal. 2007) .................................................................6, 20
5
Ashcroft v. Iqbal,
6 --- U.S. ---, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009) ...............................................................5

7 Balistreri v. Pacifica Police Dep't,


901 F.2d 696 (9th Cir. 1990) ........................................................................................................5
8
Bell Atl. Corp. v. Twombly,
9 550 U.S. 544, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007) ...........................................................5

10 Blank v. Kirwan,
39 Cal. 3d 311 (1985) .................................................................................................................15
11
Cel-Tech Comm'ns, Inc. v. Los Angeles Cellular Telephone Co.,
12 20 Cal. 4th 163 (1999)..........................................................................................................23, 25
13 Cinebase Software, Inc. v. Media Guaranty Trust, Inc.,
1998 WL 661465 (N.D. Cal. 1998) ........................................................................................8, 16
14
Conrad v. Bank of America,
15 45 Cal. App. 4th 133 (Cal. App. 1996) ................................................................................20, 21
16 DVD Copy Control Ass'n, Inc. v. Bunner,
116 Cal. App. 4th 241 (2004) .......................................................................................................9
17
Della Penna v. Toyota Motor Sales, U.S.A., Inc.,
18 11 Cal. 4th 376 (1995)................................................................................................................14
19 Designs Art v. National Football League Properties, Inc.,
2000 WL 1919787 (S.D. Cal. 2000) ............................................................................................9
20
Eldorado Stone, LLC v. Renaissance Stone, Inc.,
21 2006 WL 4569360 (S.D. Cal. 2006) ..........................................................................................16

22 FMC Corp. v. Capital Cities/ABC, Incl.,


915 F.2d 300 (7th Cir. 1990) ......................................................................................................19
23
Fremont Indemnity Co. v. Fremont General Co.,
24 148 Cal. App. 4th 97 (2007) ...........................................................................................17, 18, 19

25 Gabriel Technologies Corp. v. Qualcomm Inc.,


2009 WL 3326631 (S.D. Cal. 2009) ....................................................................................11, 13
26
Gemisys Corp. v. Phoenix American, Inc.,
27 186 F.R.D. 551 (N.D. Cal. 1999) .................................................................................................7

28
04372.51777/3871926.4 Case No. :10-CV-05471-SBA
-ii-
HALOGEN SOFTWARE INC.’S MEMORANDUM OF POINTS AND
AUTHORITIES IN SUPPORT OF MOTION TO DISMISS
Case4:10-cv-05471-SBA Document27 Filed12/27/10 Page6 of 32

1 Goehring v. Chapman Univ.,


121 Cal. App. 4th 353 (2004) ...............................................................................................22, 23
2
Interserve, Inc. v. Fusion Garage PTE. LTD.,
3 2010 WL 3339520 (N.D. Cal. 2010) ....................................................................................22, 24

4 K.C. Multimedia, Inc. v. Bank of America Tech. & Ops., Inc.,


171 Cal. App. 4th 939 (2009) .....................................................................................9, 10, 11, 19
5
KEMA, Inc. v. Koperwhats,
6 2010 WL 3464708 (N.D. Cal. 2010) ..........................................................................................20

7 Kremen v. Cohen,
337 F.3d 1024 (9th Cir. 2003) ....................................................................................................18
8
Kruse v. Bank of Am.,
9 202 Cal. App. 3d 38 (1988) ..................................................................................................22, 23

10 Lusa Lighting, Int'l, Inc. v. Am. Elex, Inc.,


2008 WL 4350741 (C.D. Cal. 2008) ..........................................................................................21
11
Out-door Media Group, Inc. v. City of Beaumont,
12 506 F.3d 895 (9th Cir. 2007) ........................................................................................................6
13 Patrick v. Alacer Corp.,
167 Cal. App. 4th 995 (2008) .....................................................................................................21
14
Pearson v. Dodd,
15 410 F.2d 701 (D.C. Cir. 1969) ...................................................................................................19
16 Rasidescu v. Midland Credit Mgmt., Inc.,
435 F. Supp. 2d 1090 (S.D. Cal. 2006) ................................................................................21, 22
17
Reeves v. Hanlon,
18 33 Cal. 4th 1140 (2004)..............................................................................................................14
19 Religious Tech. Ctr. v. Netcom On-Line Comm'n Servs.,
923 F. Supp. 1231 (N.D. Cal. 1995) ............................................................................................8
20
Roque v. Suntrust Mortg., Inc.,
21 2010 WL 546896 (N.D. Cal. 2010) ............................................................................6, 20, 21, 22

22 Searle v. Wyndham Int'l Inc.,


102 Cal. App. 4th 1327 (Cal. App. 2002) ..................................................................................24
23
Silicon Knights, Inc. v. Crystal Dynamics, Inc.,
24 983 F. Supp. 1303 (N.D. Cal. 1997) ..........................................................................................15

25 Silvaco Data Systems v. Intel Corp.,


184 Cal. App. 4th 210 (2010) .................................................................................................9, 10
26
Stoody-Broser v. Bank of America, N.A.,
27 2009 WL 2707393, at *5 (N.D. Cal. 2009) ................................................................................14

28
04372.51777/3871926.4 Case No. :10-CV-05471-SBA
-iii-
HALOGEN SOFTWARE INC.’S MEMORANDUM OF POINTS AND
AUTHORITIES IN SUPPORT OF MOTION TO DISMISS
Case4:10-cv-05471-SBA Document27 Filed12/27/10 Page7 of 32

1 Swartz v. KPMG LLP,


476 F.3d 756 (9th Cir. 2007) ........................................................................................................6
2
Westside Center Associates v. Safeway Stores 23, Inc.,
3 42 Cal. App. 4th 507 (1996) .......................................................................................... 15, 16, 17

4 Williston Basin Interstate Pipeline Co. v. An Exclusive Gas Storage Leasehold and
Easement in the Cloverly Subterranean, Geological Formation,
5 524 F.3d 1090 (9th Cir. 2008) ......................................................................................................6

6
Statutes
7
Cal. Civ. Code § 3426.1(a) ...............................................................................................................13
8
Cal. Civ. Code § 3426.1(d) ................................................................................................................7
9
Cal. Civ. Code § 3426.1(d)(1) ................................................................................................7, 12, 13
10
Fed. R. Civ. P. 9(b).................................................................................................................6, 20, 21
11
Fed. R. Civ. P. 12(b)(6) ......................................................................................................................5
12
Fed. R. Civ. P. 12(e) .........................................................................................................................24
13

14 Other Authorities
15 5 Witkin Summ. of Cal. Law § 700 (10th ed. 2005) ........................................................................18

16

17

18

19

20

21

22

23

24

25

26

27

28
04372.51777/3871926.4 Case No. :10-CV-05471-SBA
-iv-
HALOGEN SOFTWARE INC.’S MEMORANDUM OF POINTS AND
AUTHORITIES IN SUPPORT OF MOTION TO DISMISS
Case4:10-cv-05471-SBA Document27 Filed12/27/10 Page8 of 32

1 MEMORANDUM OF POINTS AND AUTHORITIES

2 I. INTRODUCTION

3 Plaintiff SuccessFactors, Inc. (“SuccessFactors”) claims that its competitor, Defendant

4 Halogen Software, Inc. (“Halogen”), set up a website to impersonate a fictional company called

5 The Magnus Group, then posed as a potentially interested customer to obtain SuccessFactors’

6 “non public” product and pricing information. While SuccessFactors alleges that Halogen used

7 these allegedly “improper means” to acquire its information, SuccessFactors does not bring a trade

8 secrets misappropriation claim under California’s Uniform Trade Secrets Act (CUTSA). Instead,

9 SuccessFactors asserts intentional interference with prospective economic advantage, conversion,

10 fraud and deceit, and unfair competition. Why no trade secrets claim? Because SuccessFactors

11 knows that the information it gave to Halogen cannot qualify as a trade secret as a matter of law.

12 In fact, the allegations, if taken as true, show:

13 • SuccessFactors gives the same type of pricing and product information it alleges it
provided to Halogen through the Magnus Group to prospective customers on a routine
14 basis;
15
• SuccessFactors gave its pricing and product information to The Magnus Group
16 without requiring that The Magnus Group sign a non-disclosure agreement or enter any
other sort of agreement to protect the confidentiality of the information provided;
17
• There was never, nor is there now, any fiduciary duty between SuccessFactors and The
18 Magnus Group; and
19 • SuccessFactors never asked The Magnus Group to return its pricing or product
20 information, even after SuccessFactors learned that The Magnus Group was not
interested in becoming a SuccessFactors customer.
21
As the Complaint currently reads, SuccessFactors is suing Halogen over SuccessFactors’
22
own willingness to disclose its product and pricing information without taking the necessary steps
23
to protect itself under the law. SuccessFactors is embarrassed about what it has done, and it has
24
brought suit alleging untenable claims that are all superseded by California’s Uniform Trade
25
Secret Act in an effort to punish Halogen for SuccessFactors’ own failings. This is further
26
confirmed by the fact that SuccessFactors’ Complaint makes nothing but broad, factually
27
unsupported claims that it has been damaged by Halogen’s alleged conduct. In the Complaint,
28
04372.51777/3871926.4 Case No. :10-CV-05471-SBA
-1-
HALOGEN SOFTWARE INC.’S MEMORANDUM OF POINTS AND
AUTHORITIES IN SUPPORT OF MOTION TO DISMISS
Case4:10-cv-05471-SBA Document27 Filed12/27/10 Page9 of 32

1 SuccessFactors fails to identify any “property” that has been permanently deprived by Halogen,

2 any instance in which its information was used or disclosed by Halogen, any specific “economic

3 relations” that have been interfered with, or any lost sales or profits as resulting from the conduct

4 complained about. SuccessFactors’ claims of damage are merely speculative, if not completely

5 non-existent.

6 Thus, even taking all of SuccessFactors’ allegations as true, all SuccessFactors succeeds in

7 doing in its Complaint is alleging that Halogen, via The Magnus Group, freely obtained non-

8 confidential information that many other companies and individuals already have in their

9 possession. There is no legally cognizable claim for relief for such activity. Halogen’s motion to

10 dismiss should be granted.

11 II. ALLEGED FACTS


12 A. The Parties
13 SuccessFactors is a public company incorporated in Delaware with its principal place of

14 business in San Mateo, California. Complaint ¶ 4. SuccessFactors’ Complaint states that it

15 provides performance and talent management software to businesses of various sizes, industries,

16 and geographies to manage their workforce and employee productivity. Id. at ¶ 10.

17 SuccessFactors claims that it has over 3,000 customers in more than sixty industries. Id. at ¶ 11.

18 SuccessFactors further boasts that it has over eight-million users worldwide. See Declaration of

19 Martin Pitkow in Support of Plaintiff’s Motion for Temporary Restraining Order and Motion for

20 Expedited Discovery, at ¶ 6 (Dkt. 12) (hereinafter “Pitkow Decl.).1

21 Halogen is a relatively small, private Canadian company with headquarters in Ottawa,

22 Canada. Complaint ¶ 5. Halogen also provides performance and talent management software.

23 Complaint ¶ 12.

24 B. SuccessFactors Freely Disseminated Its Product And Pricing Information to


The Magnus Group
25

26 1
Halogen respectfully requests that the court to take judicial notice of the Pitkow declaration
27 pursuant to Federal Rule of Evidence 201 for all the reasons cited in Halogen’s Request for
Judicial Notice filed herewith.
28
04372.51777/3871926.4 Case No. :10-CV-05471-SBA
-2-
HALOGEN SOFTWARE INC.’S MEMORANDUM OF POINTS AND
AUTHORITIES IN SUPPORT OF MOTION TO DISMISS
Case4:10-cv-05471-SBA Document27 Filed12/27/10 Page10 of 32

1 SuccessFactors alleges that on July 26, 2010, a woman by the name of “Anna Rodriguez”

2 from an organization called The Magnus Group contacted SuccessFactors to inquire about

3 SuccessFactors’ Performance Management solutions. Complaint ¶ 22. Allegedly believing that

4 Ms. Rodriguez was a potential customer, SuccessFactors sent Ms. Rodriguez a sales email and

5 initiated the sales process with her. Id. at ¶ 23. Shortly thereafter, Ms. Rodriguez allegedly spoke

6 with Scott Larkins, a regional sales manager for SuccessFactors. Id. at ¶ 24. During this

7 conversation, Ms. Rodriguez allegedly explained the specific needs of The Magnus Group and

8 allegedly requested information and a sales demonstration of SuccessFactors' mid-size business

9 solutions. Id. Mr. Larkins allegedly arranged for such a demonstration to take place with Ms.

10 Rodriguez and one of her colleagues on August 19, 2010 . Id.

11 According to SuccessFactors' Complaint, on August 19, 2010, Mr. Larkins freely provided
12 Ms. Rodriguez and her colleague with a nearly three-hour product demonstration. Complaint ¶¶

13 26-27. Thereafter, Ms. Rodriguez allegedly requested further information and demonstrations of

14 SuccessFactors products and services. Id. Again, Mr. Larkins freely provided the allegedly

15 requested information to Ms. Rodriguez, including:

16 • Number of hours of training included in cost;


17 • Training delivery method – web, on-site, classroom, other;
18
• Targeted training audience – end user, administration, “train-the-trainer,” other;
19
• Types of courses – end user usage, configuration setup;
20
• Implementation assistance – dedicated implementation team or 1 dedicated
21 implementation analyst;
22 • Configuration setup – are there limitations?; # of appraisal forms, etc.?;
23
• Average length of time to implement each module;
24
• Customer Support specifics about the hours of operation, emergency coverage
25 options, locations of support centers;

26 • Pricing; and
27 • Information about SuccessFactors’ process of implementing its solutions for
customers as well as the average times and scope for implementation.
28
04372.51777/3871926.4 Case No. :10-CV-05471-SBA
-3-
HALOGEN SOFTWARE INC.’S MEMORANDUM OF POINTS AND
AUTHORITIES IN SUPPORT OF MOTION TO DISMISS
Case4:10-cv-05471-SBA Document27 Filed12/27/10 Page11 of 32

1 Complaint ¶¶ 28-29. There is no allegation that any of this information was provided to Ms.

2 Rodriguez under a non-disclosure agreement, that the parties entered into any sort of

3 confidentiality agreement, or that before providing this information to Ms. Rodriguez, Mr. Larkins

4 otherwise communicated an expectation of confidentiality concerning this information to Ms.

5 Rodriguez in any way.

6 On September 9, 2010, SuccessFactors alleges that Mr. Larkins again provided Ms.

7 Rodriguez pricing information. Complaint ¶ 30. There is no allegation that this pricing

8 information was requested by Ms. Rodriguez or The Magnus Group. SuccessFactors alleges that

9 the pricing information provided on September 9, 2010 was unilaterally accompanied by the

10 following admonition: “The attached proposal contains confidential and proprietary information

11 of SuccessFactors. This proposal and other SuccessFactors proposals may only be used for

12 internal business purposes, and may only be disclosed to third parties with SuccessFactors’ prior

13 written consent.” Complaint ¶ 30. There is no allegation that Ms. Rodriguez, The Magnus Group,

14 or Halogen ever expressly or otherwise accepted this admonition, or was even aware of it.

15 Shortly after receiving Mr. Larkins’ September 9, 2010 communication, Ms. Rodriguez

16 allegedly informed Mr. Larkins on September 16, 2010 that The Magnus Group was no longer

17 interested in SuccessFactors’ product. Complaint ¶ 31. Suspicious that a potential customer

18 suddenly backed out, Mr. Larkins began an investigation no later than the next day on Ms.

19 Rodriguez and The Magnus Group. Complaint ¶¶ 32-34. According to the Complaint, Mr.

20 Larkins’ and SuccessFactors’ subsequent investigation linked The Magnus Group to Halogen. Id.

21 C. SuccessFactors' Claims for Relief


22 On December 2, 2010, SuccessFactors filed suit against Halogen alleging that Halogen

23 engaged in a scheme to misappropriate SuccessFactors’ “confidential,” “proprietary,” and “non-

24 public” sales and product information. Complaint ¶¶ 26, 27, 28, 29, and 60. Despite the alleged

25 “confidential,” “proprietary,” and “non-public” nature of the information SuccessFactors freely,

26 and possibly in one case, proactively, handed over to Ms. Rodriguez and The Magnus Group,

27 SuccessFactors does not state a cause of action for trade secret misappropriation. Instead,

28
04372.51777/3871926.4 Case No. :10-CV-05471-SBA
-4-
HALOGEN SOFTWARE INC.’S MEMORANDUM OF POINTS AND
AUTHORITIES IN SUPPORT OF MOTION TO DISMISS
Case4:10-cv-05471-SBA Document27 Filed12/27/10 Page12 of 32

1 SuccessFactors claims that Halogen is liable for intentional interference with prospective

2 economic advantage, conversion, fraud and deceit, and unfair competition. Complaint ¶¶ 3, 36-67.

3 SuccessFactors’ failure to state a cause of action for trade secret misappropriation is not

4 surprising. Within its Complaint, SuccessFactors makes no allegations that Ms. Rodriguez was

5 ever asked by SuccessFactors to sign a non-disclosure or confidentiality agreement relating to the

6 information she received; nor are there allegations that the information provided to Ms. Rodriguez

7 was ever preceded by any verbal agreement to keep such information confidential. Moreover,

8 SuccessFactors has not informed Halogen or the Court of how its failure to obtain any such

9 agreement with Ms. Rodriguez was an anomaly with respect to its conduct towards potential

10 customers. Particularly, it provides no allegations about how it seeks to protect against the

11 dissemination of the information given to Ms. Rodriquez—information that it routinely provides

12 to its hundreds, if not thousands, of potential customers.

13 D. SuccessFactors’ Motion For Temporary Restraining Order


14 On December 6, 2010, SuccessFactors moved for a Temporary Restraining Order to Show

15 Cause re Preliminary Injunction (“TRO Motion”) and for Expedited Discovery. See Dkt. 10 and

16 8, respectively. Because of the limited relief SuccessFactors sought by the motion, Halogen

17 agreed to enter into a Stipulated Order for Provisional Relief and Commencement of Discovery

18 (“Stipulated Order”), which was granted by the Court on December 10, 2010. See Dkt. 22.

19 III. ARGUMENT
20 A. Legal Standards
21 A Rule 12(b)(6) dismissal for failure to state a claim can be based on either: (1) the lack of

22 a cognizable legal theory; or (2) insufficient facts to support a cognizable legal claim. Balistreri v.

23 Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990). The plaintiff's factual allegations “must

24 be enough to raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550

25 U.S. 544, 556, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Those facts must be sufficient to push the

26 claims “across the line from conceivable to plausible[.]” Ashcroft v. Iqbal, --- U.S. ----, 129 S.Ct.

27 1937, 1951, 173 L.Ed.2d 868 (2009) (quoting Twombly, 550 U.S. at 557). In deciding a Rule

28 12(b)(6) motion, the court “may generally consider only allegations contained in the pleadings,
04372.51777/3871926.4 Case No. :10-CV-05471-SBA
-5-
HALOGEN SOFTWARE INC.’S MEMORANDUM OF POINTS AND
AUTHORITIES IN SUPPORT OF MOTION TO DISMISS
Case4:10-cv-05471-SBA Document27 Filed12/27/10 Page13 of 32

1 exhibits attached to the complaint, and matters properly subject to judicial notice[.]” Williston

2 Basin Interstate Pipeline Co. v. An Exclusive Gas Storage Leasehold and Easement in the

3 Cloverly Subterranean, Geological Formation, 524 F.3d 1090, 1096 (9th Cir. 2008). The court is

4 to “accept all factual allegations in the complaint as true and construe the pleadings in the light

5 most favorable to the nonmoving party.” Out-door Media Group, Inc. v. City of Beaumont, 506

6 F.3d 895, 899-900 (9th Cir. 2007).

7 In addition, “where a complaint includes allegations of fraud, Federal Rule of Civil

8 Procedure 9(b) requires more specificity” as to the circumstances of the alleged fraud. Swartz v.

9 KPMG LLP, 476 F.3d 756, 764 (9th Cir. 2007). Courts in this district have routinely held that all

10 the required elements (including reliance and damages) must be pled with specificity. See e.g.,

11 Roque v. Suntrust Mortg., Inc., 2010 WL 546896, *5 (N.D. Cal. 2010) (“In order to state a claim

12 for fraud, plaintiff must plead the following elements with specificity: (1) false representation as to

13 a material fact; (2) knowledge of falsity; (3) intent to defraud; (4) justifiable reliance and resulting

14 damages”); Applied Elastomerics, Inc. v. Z-Man Fishing Prods., Inc., No. 06-2469, 2007 WL

15 703606, *3 (N.D. Cal. 2007) (“In order to state an affirmative defense for fraud, Defendant must

16 plead with specificity the following elements: misrepresentation, scienter, intent to defraud,

17 justifiable reliance and resulting damage.”). As the court in Roque held when dismissing

18 plaintiff’s fraud claim on Rule 9(b) grounds, “such [fraud] actions require a strict pleading

19 standard and a liberal construction will not be invoked to sustain a pleading defective in any

20 material respect.” Roque, 2010 WL 546896 at *5 (emphasis added).

21 B. SuccessFactors Has Not Stated and Cannot State a Claim for Trade Secret
Misappropriation.
22
As stated in the Complaint, SuccessFactors alleges that Halogen has fraudulently obtained
23
and misappropriated its “confidential,” “proprietary,” and “non-public” sales and product
24
information. Complaint ¶¶ 26, 27, 28, 29, and 60. Yet, SuccessFactors does not allege trade
25
secret misappropriation. This is because it cannot.
26
First, the terms “proprietary” and “non-public” have no meaning here. The term
27
“proprietary” refers solely to ownership and has no bearing on the confidential or secret nature of
28
04372.51777/3871926.4 Case No. :10-CV-05471-SBA
-6-
HALOGEN SOFTWARE INC.’S MEMORANDUM OF POINTS AND
AUTHORITIES IN SUPPORT OF MOTION TO DISMISS
Case4:10-cv-05471-SBA Document27 Filed12/27/10 Page14 of 32

1 such information. See Gemisys Corp. v. Phoenix American, Inc., 186 F.R.D. 551, 559 (N.D. Cal.

2 1999) (“[T]hese paragraphs demonstrate that PMIS is proprietary-that is, that PMIS is owned by

3 Gemisys-but they do not by their terms require confidentiality, secrecy, or nondisclosure.”). Thus,

4 information that is “proprietary” does not automatically deserve protection under the law, as trade

5 secret protection is only warranted where there is some showing that reasonable efforts were made

6 to maintain the confidentiality and secrecy of information. See id. (denying trade secret protection

7 under Colorado’s Uniform Trade Secrets Act where plaintiff failed to show that it took reasonable

8 measures to maintain the confidentiality of its proprietary information); see also Cal. Civ. Code §

9 3426.1(d)(1) (trade secret must be “subject of efforts that are reasonable under the circumstances

10 to maintain its secrecy”).

11 Likewise, SuccessFactors cannot create a legally protectable interest in the information it

12 alleges it freely provided to The Magnus Group simply by referring to it as “non-public.” Many

13 types of information can be considered “non-public,” yet not rise to the level of confidentiality or

14 secrecy necessary to warrant legal protection. In any event, SuccessFactors cannot legitimately

15 claim that its product and pricing information is non-public, since it freely gives that information

16 to hundreds—perhaps thousands—of people.

17 Next, merely claiming that information is “confidential” is insufficient to establish that

18 such information deserves the kind of trade secret protection that SuccessFactors seeks (i.e.,

19 protection from disclosure and use of its information by competitors). To constitute a trade secret,

20 and thus warrant trade secret protection, it must be shown that the information sought to be

21 protected “(1) [d]erives independent economic value, actual or potential, from not being generally

22 known to the public or to other persons who can obtain economic value from its disclosure or use;

23 and (2) [i]s the subject of efforts that are reasonable under the circumstances to maintain its

24 secrecy.” Cal. Civ. Code § 3426.1(d). Although SuccessFactors devotes much effort to

25 establishing the importance of the information it freely disclosed to The Magnus Group, it fails to

26 allege that it took the necessary precautions to protect the confidentiality of this information.

27 Protections deemed sufficient to establish that reasonable efforts were made to maintain secrecy

28 include limiting access to information, advising persons with access to the information of the
04372.51777/3871926.4 Case No. :10-CV-05471-SBA
-7-
HALOGEN SOFTWARE INC.’S MEMORANDUM OF POINTS AND
AUTHORITIES IN SUPPORT OF MOTION TO DISMISS
Case4:10-cv-05471-SBA Document27 Filed12/27/10 Page15 of 32

1 confidential and secret nature of the information, executing non-disclosure or other confidentiality

2 agreements, storing of information on a restricted-access computer or in a secure location. See

3 Cinebase Software, Inc. v. Media Guaranty Trust, Inc., 1998 WL 661465 at *11 (N.D. Cal. 1998)

4 (finding plaintiff's “failure to secure nondisclosure agreements from technical personnel” not

5 reasonable); see also Religious Tech. Ctr. v. Netcom On-Line Comm'n Servs., 923 F.Supp. 1231,

6 1253 (N.D. Cal. 1995) (holding that efforts were reasonable where plaintiff protected secret by

7 “use of locked cabinets, safes, logging and identification of the materials, availability of the

8 materials at only a handful of sites worldwide, electronic sensors attached to documents, locked

9 briefcases for transporting works, alarms, photo identifications, security personnel, and

10 confidentiality agreements for all of those given access to the materials”). SuccessFactors fails to

11 allege that any such protections are taken with respect to the information it allegedly provided to

12 The Magnus Group.

13 In fact, SuccessFactors fails to even allege that prior to disclosing its allegedly

14 "confidential" information to The Magnus Group, SuccessFactors executed a non-disclosure

15 agreement, a confidentiality agreement, or any sort of arrangement of any kind that would have

16 obligated The Magnus Group to maintain the information it received in secret. At most,

17 SuccessFactors points to a confidentiality disclaimer present on a single email it unilaterally sent

18 to The Magnus Group relatively late in the parties’ dealings with each other. Complaint ¶ 30.

19 SuccessFactors also fails to allege any sort of fiduciary relationship between it and The Magnus

20 Group. In short, there are no allegations whatsoever to even suggest that SuccessFactors expected

21 that The Magnus Group would maintain the confidentiality of the information it freely provided in

22 the course of the parties' alleged dealings, let alone that such information would be maintained as a

23 trade secret.

24 To the contrary, SuccessFactors' allegations make clear that SuccessFactors treated The

25 Magnus Group as nothing more and nothing less than a sales prospect. See, e.g., Complaint ¶¶ 22-

26 30. There was no contract of any kind between the parties. And, most surprisingly, despite

27 having disclosed the product and pricing information to The Magnus Group in September 2010,

28
04372.51777/3871926.4 Case No. :10-CV-05471-SBA
-8-
HALOGEN SOFTWARE INC.’S MEMORANDUM OF POINTS AND
AUTHORITIES IN SUPPORT OF MOTION TO DISMISS
Case4:10-cv-05471-SBA Document27 Filed12/27/10 Page16 of 32

1 and learning in that same month that The Magnus Group was not interested in buying

2 SuccessFactors’ products, SuccessFactors did absolutely nothing to retrieve the information.

3 Simply put, SuccessFactors treated the pricing and product information before, during, and

4 after the disclosure to The Magnus Group as the most valueless marketing “pitch” information.

5 See, e.g., DVD Copy Control Ass’n, Inc. v. Bunner, 116 Cal. App. 4th 241, 252 (2004) (no trade

6 secret protection in form of a preliminary injunction where “proprietary information may have

7 been distributed to a worldwide audience of millions prior to [defendant’s] first posting” on his

8 website); Designs Art v. National Football League Properties, Inc., 2000 WL 1919787, at *3 (S.D.

9 Cal. 2000) (dismissing trade secret claim on a motion to dismiss because the alleged “secret” was

10 generally known).

11 SuccessFactors has not alleged and plainly cannot allege a trade secrets claim in this case.

12 C. SuccessFactors' Tort Claims Are Preempted by the California Uniform Trade


Secrets Act.
13
CUTSA provides the exclusive remedy for alleged misappropriation of “information . . . of
14
value” under California law. See Silvaco Data Systems v. Intel Corp., 184 Cal. App. 4th 210, 236,
15
239 n.22 (2010) (“We thus reaffirm that CUTSA provides the exclusive civil remedy for conduct
16
falling within its terms, so as to supersede other civil remedies ‘based upon misappropriation of a
17
trade secret.’”) (citation omitted); see also K.C. Multimedia, Inc. v. Bank of America Tech. &
18
Ops., Inc., 171 Cal. App. 4th 939, 959 (2009) (CUTSA “preempts all common law claims that are
19
based on the same nucleus of facts as the misappropriation of trade secrets claim for relief.”).
20
In fact, CUTSA supersedes “other causes of action even though it does not itself provide
21
relief on a particular set of facts.” Silvaco, 184 Cal. App. 4th at 237 (emphasis added). In
22
Silvaco, for example, the plaintiff brought claims for trade secret misappropriation, conversion,
23
conspiracy, and violations of the unfair competition law where the defendant used software
24
acquired from another software company with knowledge that plaintiff had accused the other
25
software company of incorporating source code, stolen from the plaintiffs, in its products. The
26
California Court of Appeals upheld the dismissal of the trade secret claim on the ground that
27
executing machine-readable software did not constitute “use” required for the claim. Despite that
28
04372.51777/3871926.4 Case No. :10-CV-05471-SBA
-9-
HALOGEN SOFTWARE INC.’S MEMORANDUM OF POINTS AND
AUTHORITIES IN SUPPORT OF MOTION TO DISMISS
Case4:10-cv-05471-SBA Document27 Filed12/27/10 Page17 of 32

1 fact plaintiff did not have a viable trade secret claim, the court also found that the other claims

2 based on the same conduct as the deficient trade secret allegations were superseded by CUTSA.

3 The court reasoned that the “central purpose of the [trade secret] act was precisely to displace

4 that [notoriously haphazard web of disparate laws governing trade secret liability] with a

5 relatively uniform and consistent set of rules defining-and thereby limiting-liability.” Id. at 234

6 (emphasis added). That is, the “claims are either ‘based upon misappropriation of a trade

7 secret’ (§ 3426.7, subd. (b)(2)) or they are based upon no legally significant events at all.” Id. at

8 236 (emphasis added). The court there went on to state that:

9 [I]nformation cannot be “stolen” unless it constitutes property. And


information is not property unless some law makes it so. If the
10 plaintiff identifies no property right outside of trade secrets law,
then he has no remedy outside that law.
11
Id. at 239 (emphasis added). Thus, the court dismissed the conversion, conspiracy, unlawful
12
business practices, and violations of the unfair competition law claims because it found no
13
“‘conduct’ identified that did not depend for its supposed wrongfulness on the use of trade
14
secrets.” Id. at 236.
15
Similarly in K.C. Multimedia, Inc. v. Bank of America Tech. & Ops., Inc., 171 Cal. App.
16
4th 939 (2009), the California Court of Appeals considered whether causes of action for breach of
17
confidence, interference with contract, and unfair competition were superseded by CUTSA.
18
There, K.C. Multimedia sued a former employee and Bank of America for misappropriation of
19
trade secret technology used in banking software it had developed for the bank. Id. at 944. Ruling
20
on a motion in limine, the lower court held that the three causes of action were “based on
21
misappropriation of trade secrets” and were, therefore, preempted. Id. at 948. At the hearing,
22
Bank of America argued that the “tort claims arise from the same operative facts; namely,
23
misappropriation of trade secrets.” Id. at 952. The court agreed, stating that “[a] fair reading of
24
appellant’s fifth amended complaint thus compels the conclusion that each and every cause of
25
action hinges upon the factual allegation that [defendants] misappropriated [appellant’s] trade
26
secrets.” Id. (citations omitted). The court thus held that the “conduct at the heart of” the related
27
tort claims and the “gravamen of the wrongful conduct asserted” in support thereof “rest[ed]
28
04372.51777/3871926.4 Case No. :10-CV-05471-SBA
-10-
HALOGEN SOFTWARE INC.’S MEMORANDUM OF POINTS AND
AUTHORITIES IN SUPPORT OF MOTION TO DISMISS
Case4:10-cv-05471-SBA Document27 Filed12/27/10 Page18 of 32

1 squarely on [K.C. Multimedia’s] factual allegations of trade secret misappropriation.” Id. at 960-

2 62 (emphasis added). Because these claims were factually based upon “the same nucleus of facts”

3 as the trade secret claim, they were superseded by the CUTSA. Id.

4 CUTSA’s preemptive impact on other civil torts is not triggered by the plaintiff actually

5 asserting a trade secret claim. For example, in Gabriel Technologies Corp. v. Qualcomm Inc.,

6 2009 WL 3326631, at *11 (S.D. Cal. 2009), the plaintiff argued in opposition to a motion to

7 dismiss that it was premature to determine whether its claims for tortious interference, conversion,

8 and unjust enrichment were preempted because it had not been determined whether the allegedly

9 misappropriated information constituted a trade secret. The court did not agree, stating that

10 “determining whether allegedly misappropriated information constitutes a trade secret is irrelevant

11 for preemption purposes because CUTSA preempts all claims based upon the unauthorized use

12 of information, even if the information does not meet the statutory definition of trade secret.”

13 Id. (emphasis added). The only way claims are not preempted is if they are not based on the same

14 facts as the misappropriation claim. See id. at *13 (refusing to dismiss fraudulent inducement

15 claim because it focused on misrepresentations regarding intent to perform a contract in the future

16 completely unrelated to the trade secret allegations).

17 Here, SuccessFactors’ numerous claims all arise from Halogen’s alleged misappropriation
18 and unlawful use of what SuccessFactors considers to be its valuable information. See Complaint

19 ¶¶ 39, 40, 46, 48, 50, 55-57, and 63-65. In paragraphs 26, 27, 28, 29, and 60 of its Complaint,

20 SuccessFactors asserts that the sales demonstrations, product information, and pricing information

21 that it freely gave to The Magnus Group was “confidential,” “proprietary,” and “non-public”

22 information of utmost value to SuccessFactors’ competitive strategies. That SuccessFactors

23 believes this information to be "valuable" is further made clear by SuccessFactors’ Vice President

24 of Field, Strategy & Enablement, Martin Pitkow, Jr., in his declaration in support of

25 SuccessFactors' TRO Motion:

26 • 17. If a competitor were to know how SuccessFactors customizes and


prices it various products and services, in what combinations and how it
27 implements them, that competitor would have insight on how to improve
its strategy of selling against SuccessFactors. Specifically, having access
28
04372.51777/3871926.4 Case No. :10-CV-05471-SBA
-11-
HALOGEN SOFTWARE INC.’S MEMORANDUM OF POINTS AND
AUTHORITIES IN SUPPORT OF MOTION TO DISMISS
Case4:10-cv-05471-SBA Document27 Filed12/27/10 Page19 of 32

1 to price lists would enable a competitor to position itself with respect to


price against SuccessFactors and to divert customers from SuccessFactors.
2
• 18. Further, SuccessFactors’ application delivery model is distinctively
3 different than that of its competitors. SuccessFactors does not provide an
out-of-the-box solution and instead offers highly customized software and
4 service packages based on a particular customer’s business and
preferences. Access to product demonstrations and sales training
5 information provides crucial information that would allow Defendant or
any other competitor the opportunity to unfairly compete in the
6 marketplace for our existing customers and any prospects.

7 • 31. Halogen could also use this information to search for potential
weaknesses in SuccessFactors’ product offerings and position itself
8 strategically against SuccessFactors which in turn could be used to
damage SuccessFactors’ customer relationships, distinguish Halogen’s
9 product from SuccessFactors’ and convince SuccessFactors’ customers
and prospects to sign up with Halogen instead of SuccessFactors.
10
• 32. Further, through The Magnus Group pretexting, Halogen now appears
11 to have access to information and documents about Plaintiff’s training and
product delivery and implementation options and could therefore position
12 its current product and shape future offerings accordingly.

13 • 33. Halogen could analyze information about SuccessFactors’ sales


strategies to see exactly how SuccessFactors presents and positions its
14 software solutions to customers and potential customers. By using this
information, Halogen could replicate SuccessFactors’ sales strategies,
15 thereby increasing its sales at SuccessFactors’ expense.

16 • 34. Halogen might also use the documents and information about
Plaintiff’s pricing to position itself to draw potential customers away from
17 SuccessFactors knowing how SuccessFactors prices its product and
service offerings and bundles its services would be crucial to successful
18 implementation of Halogen’s sales approach.

19 • 35. Importantly, knowing firsthand (from live product demonstrations


normally reserved only for customers) how SuccessFactors customizes its
20 offerings, designs its user interface and provides support and training to
users would be invaluable to the design and development of Halogen’s
21 own products and services. Halogen, having access to this information,
could copy the look and feel of Plaintiffs’ product offerings.
22
(Pitkow Decl. ¶¶ 17-18, 31-35 [Dkt. 12].)2 The efforts of SuccessFactors to state the value of the
23
alleged misappropriated information track, but utterly fail to meet, CUTSA requirements for
24
information to qualify as a trade secret. See Cal. Civ. Code § 3426.1(d)(1) (trade secret means
25

26 2
Halogen respectfully requests that the court to take judicial notice of the Pitkow declaration
27 pursuant to Federal Rule of Evidence 201 for all the reasons cited in Halogen’s Request for
Judicial Notice filed herewith.
28
04372.51777/3871926.4 Case No. :10-CV-05471-SBA
-12-
HALOGEN SOFTWARE INC.’S MEMORANDUM OF POINTS AND
AUTHORITIES IN SUPPORT OF MOTION TO DISMISS
Case4:10-cv-05471-SBA Document27 Filed12/27/10 Page20 of 32

1 information, program, method, technique, or process that “[d]erives independent economic value

2 . . . from not being generally known to the public or to other persons who can obtain economic

3 value from its disclosure or use.”).

4 Paragraph 49 of the Complaint also alleges that “[s]uch property has been the subject of

5 efforts that were reasonable under the circumstances to maintain its proprietary nature”—virtually

6 mirroring the definition of a trade secret, but using the meaningless word "proprietary" in place of

7 "trade secret." See Cal. Civ. Code § 3426.1(d)(1) (trade secret must be “subject of efforts that are

8 reasonable under the circumstances to maintain its secrecy”).

9 Paragraph 50 of the Complaint further alleges that Halogen knew or had reason to know

10 that SuccessFactors’ information was acquired by “improper means”—again, virtually mirroring

11 the statutory language in CUTSA. See Cal. Civ. Code § 3426.1(a) (defining “improper means”).

12 Indeed, the wrongful conduct alleged in SuccessFactors’ Complaint—i.e., the alleged

13 misrepresentations and use of false identities to obtain SuccessFactors’ information (Complaint ¶¶

14 1, 18-30, and 35)—is the same conduct that falls squarely within the statutory definition of

15 “improper means” for acquiring purported trade secret information. See Cal. Civ. Code §

16 3426.1(a) (covering “theft,” “misrepresentation,” and “espionage through electronic means”); see

17 also Gabriel Technologies Corp., 2009 WL 3326631, at *12 (dismissing tortious interference,

18 conversion and unfair competition claims where the “gravamen of the wrongful conduct is the

19 same conduct alleged regarding the misappropriation of trade secrets”; holding,“[l]egally, that

20 conduct falls within the statutory definition of ‘improper means’ of acquiring a trade secret”).

21 If SuccessFactors could have alleged a trade secret claim here, it would have. It plainly

22 cannot, since the information Halogen allegedly obtained through The Magnus Group's alleged

23 activities does not qualify. See, supra, section III.B. The law is clear that SuccessFactors cannot

24 circumvent CUTSA's strict requirements by asserting a variety of tort claims based on the very

25 same set of facts that would have comprised a trade secrets claim – even if the information

26 allegedly misappropriated had, in fact, arguably been a trade secret. See Mattel, Inc. v. MGA

27 Entertainment, Inc., Case No. CV04-9049 at 69-71. (C.D. Cal. Dec. 27, 2010) (recently reviewing

28 California’s and other states’ applicable decisions, and holding that the “UTSA supersedes claims
04372.51777/3871926.4 Case No. :10-CV-05471-SBA
-13-
HALOGEN SOFTWARE INC.’S MEMORANDUM OF POINTS AND
AUTHORITIES IN SUPPORT OF MOTION TO DISMISS
Case4:10-cv-05471-SBA Document27 Filed12/27/10 Page21 of 32

1 based on the misappropriation of confidential information, whether or not that information meets

2 the statutory definition of a trade secret”).

3 SuccessFactors' fraud, conversion, intentional interference and unfair competition claims

4 are plainly preempted by CUTSA and should be dismissed. Moreover, because SuccessFactors

5 cannot allege a trade secret claim, see supra section III.B., there is no cause of actions for which

6 relief can be granted. Thus, SuccessFactors’ claims should be dismissed with prejudice. See

7 Stoody-Broser v. Bank of America, N.A., 2009 WL 2707393, at *5 (N.D. Cal. 2009) (dismissing

8 complaint without leave to amend where claims were preempted by federal securities law and

9 claims could not be pled to fall outside the scope of preemption).

10 D. SuccessFactors’ Claims Fail To State A Cognizable Cause Of Action


11 Even if SuccessFactors' claims for relief were not superseded by CUTSA, they each fail to

12 state a claim and should be dismissed.

13 1. SuccessFactors’ Intentional Interference With Prospective Economic


Relations Claim Fails To State A Cognizable Cause Of Action
14
To succeed on an intentional interference with prospective economic relations claim, a
15
plaintiff must show: “(1) an economic relationship between the plaintiff and some third party, with
16
the probability of future economic benefit to the plaintiff; (2) the defendant’s knowledge of the
17
relationship; (3) the defendant’s intentional acts designed to disrupt the relationship; (4) actual
18
disruption of the relationship; and (5) economic harm to the plaintiff proximately caused by the
19
defendant’s acts.” Reeves v. Hanlon, 33 Cal.4th 1140, 1152 n.6 (2004). The plaintiff must also
20
“prove that the defendant engaged in an independently wrongful act in disrupting the
21
relationship.” Id. at 1152; see also Della Penna v. Toyota Motor Sales, U.S.A., Inc., 11 Cal.4th
22
376, 393 (1995).
23
(a) SuccessFactors fails to allege a relationship from which it
24 expected to receive an economic benefit.
25 SuccessFactors’ intentional interference with prospective economic relations allegations do

26 not give rise to a cause of action because SuccessFactors has failed to establish the first, and most

27 important, element of the claim: existence of a relationship from which it expected to receive an

28 economic benefit. The laws governing the tort of intentional interference “preclude[] recovery for
04372.51777/3871926.4 Case No. :10-CV-05471-SBA
-14-
HALOGEN SOFTWARE INC.’S MEMORANDUM OF POINTS AND
AUTHORITIES IN SUPPORT OF MOTION TO DISMISS
Case4:10-cv-05471-SBA Document27 Filed12/27/10 Page22 of 32

1 overly speculative expectancies by initially requiring proof of a business relationship with the

2 probability of future economic relationship.” Westside Center Associates v. Safeway Stores 23,

3 Inc., 42 Cal. App. 4th 507, 522 (1996) (internal citations omitted). In Westside Center, the

4 California Supreme Court held that this requirement precludes a plaintiff from seeking recovery

5 based on “hypothetical relationships” not developed at the time of the alleged acts; in that case, the

6 market of possible buyers of plaintiff’s land. Id. at 522, 527 (noting that “expectation of a future

7 sale was ‘at most a hope for an economic relationship and a desire for future benefit.’”) (citing

8 Blank v. Kirwan, 39 Cal. 3d 311, 331 (1985)).

9 Thus, a plaintiff claiming intentional interference with prospective economic relations

10 must allege a specific relationship with which it expected to receive an economic benefit. See

11 Westside Center, 42 Cal. App. 4th at 522, 527; Silicon Knights, Inc. v. Crystal Dynamics, Inc.,

12 983 F. Supp. 1303, 1311-12 (N.D. Cal. 1997) (dismissing intentional interference claim where

13 complaint alleged wrongful interference with “customers, potential customers, industry and

14 associates and the public”); Eldorado Stone, LLC v. Renaissance Stone, Inc., 2006 WL 4569360,

15 at *4 (S.D. Cal. 2006) (dismissing claim where complaint alleged interference with unidentified

16 “actual and prospective customers, purchasers, and users of its manufactured stone,” and noting

17 that “[s]uch a broad class of allegedly injured individuals consists of potentially hundreds if not

18 thousands of affected customers and fails to provide Counterclaimants with adequate notice of the

19 claims asserted against them”).

20 Similar to the plaintiff in Westside Center, SuccessFactors asserts that Halogen has

21 interfered in SuccessFactors’ market of possible buyers. SuccessFactors claims that Halogen has

22 committed acts “designed to disrupt SuccessFactor’s prospective economic relationships” and has

23 “induc[ed] SuccessFactors’ prospective customers to refrain from purchasing SuccessFactors’

24 products or otherwise doing business with SuccessFactors.” Complaint ¶ 39. However,

25 SuccessFactors does not, and cannot, identify a single prospective customer from which it

26 expected to receive an economic benefit. In fact, SuccessFactors fails to even identify a single

27 current customer whose business has been lost as a result of Halogen’s alleged actions.

28 SuccessFactors’ claim is based solely on the possibility of hypothetical future relationships. “To
04372.51777/3871926.4 Case No. :10-CV-05471-SBA
-15-
HALOGEN SOFTWARE INC.’S MEMORANDUM OF POINTS AND
AUTHORITIES IN SUPPORT OF MOTION TO DISMISS
Case4:10-cv-05471-SBA Document27 Filed12/27/10 Page23 of 32

1 the extent [a] plaintiff alleges interference with hypothetical, ‘potential,’ or ‘prospective’

2 relationships, the claim is not cognizable under California law.” Cinebase Software, Inc. v. Media

3 Guaranty Trust, Inc., 1998 WL 661465, at *9 (N.D. Cal. 1998) (citing Westside Center, 42 Cal.

4 App. 4th at 522); see also Silicon Knights, 983 F. Supp. at 1311-12; Eldorado Stone, 2006 WL

5 4569360, at *4. Thus, SuccessFactors’ claim that Halogen has interfered with SuccessFactors’

6 “prospective” buyers fails to state a claim and should be dismissed.

7 (b) SuccessFactors fails to allege a harm.


8 SuccessFactors’ intentional interference claim further fails to give rise to a cause of action
9 because SuccessFactors has not alleged any economic harm proximately caused by Halogen’s

10 alleged acts. Again, instead making specific allegations of lost sales, profits, or market share,

11 SuccessFactors speculates that “[a]s a direct and proximate result of the intentional interference

12 with prospective economic relations by Halogen alleged above, SuccessFactors has suffered loss,

13 damage and injury in an amount to be proven at trial.” Complaint ¶ 42. Such speculation

14 continues in paragraph 35 of the Complaint, in which SuccessFactors states, in conclusory fashion,

15 that Halogen’s receipt of SuccessFactors’ “proprietary” information has “undermined, and will

16 only continue to undermine, SuccessFactors’ sales efforts with other customers and prospective

17 customers . . . . [C]ontinued use of the pricing and product information it wrongfully obtained will

18 cost considerable, untold sales, as well as injury to [SuccessFactors] goodwill.”

19 The hypothetical harm that SuccessFactors alleges is insufficient to state a cause of action

20 for tortious interference. In Westside Center, the plaintiff sought to recover the difference

21 between what it received for its portion of a shopping center and what it allegedly could have

22 received but for the defendant’s interference in its negotiations concerning the purchase of a

23 particular store building. Westside Center, 42 Cal. App. 4th at 529. The court held that such a

24 claim for damages “relies on the existence of a future market for the center to show the

25 negotiations eventually would have yielded the expected benefit. The claim therefore suffers from

26 the same inherent uncertainties discussed in the previous section in that a relationship with the

27 general market is not enough by itself to demonstrate a reasonable probability of future economic

28 advantage.” Id. at 529-30. Here, SuccessFactors likewise relies on the existence of a future
04372.51777/3871926.4 Case No. :10-CV-05471-SBA
-16-
HALOGEN SOFTWARE INC.’S MEMORANDUM OF POINTS AND
AUTHORITIES IN SUPPORT OF MOTION TO DISMISS
Case4:10-cv-05471-SBA Document27 Filed12/27/10 Page24 of 32

1 market for its sales efforts in an attempt to show that it would have yielded an expected benefit

2 absent Halogen’s alleged interference. Such a claim of harm is speculative because

3 SuccessFactors’ relationship with the general market, however historically profitable, is by itself

4 not enough to show that SuccessFactors had “a reasonable probability of future economic

5 advantage” from which damages could be determined. See id. Accordingly, there are no facts

6 from which the court can reasonably infer that Halogen’s actions proximately caused

7 SuccessFactors’ speculated damages.

8 These allegations are all the more speculative considering SuccessFactors’ admission that

9 it “operates in an intensely competitive environment occupied by more than twenty other

10 competitors.” Complaint ¶ 13. With more than “twenty other competitors,” it is very likely that

11 SuccessFactors’ potential customers, who it alleges have been intercepted by Halogen, decide on a

12 vendor for performance and talent management software for many different reasons. These

13 reasons may include one or a combination of factors, such as price, ease of use, unique

14 capabilities, functionality, the existence of a vertical specific offering, the number and frequency

15 of software updates, customer support, customer size, whether they liked the company or their

16 designated sales representative’s approach, customer referrals, favorable customer references, as

17 well as scores of other reasons. Apart from conclusory allegations, the Complaint furnishes no

18 reason to believe that Halogen’s actions are the reason any customers decided on a vendor other

19 than SuccessFactors. Without allegations of interference with an actual relationship resulting in

20 actual harm, SuccessFactors’ interference claim is purely speculative and should be dismissed.

21 2. SuccessFactors’ Conversion Claim Fails To State A Cognizable Cause


Of Action
22
“Conversion is generally described as the wrongful exercise of dominion over the personal
23
property of another.” Fremont Indemnity Co. v. Fremont General Co., 148 Cal. App. 4th 97, 119
24
(2007). The basic elements of the tort are: “(1) the plaintiff’s ownership or right to possession of
25
personal property; (2) the defendant’s disposition of the property in a manner that is inconsistent
26
with the plaintiff’s property rights; and (3) resulting damages.” Id. “An action for conversion
27

28
04372.51777/3871926.4 Case No. :10-CV-05471-SBA
-17-
HALOGEN SOFTWARE INC.’S MEMORANDUM OF POINTS AND
AUTHORITIES IN SUPPORT OF MOTION TO DISMISS
Case4:10-cv-05471-SBA Document27 Filed12/27/10 Page25 of 32

1 properly lies only where there is some substantial interference with possession or the right to

2 possession . . . .” 5 Witkin Summ. of Cal. Law § 700 (10th ed. 2005).

3 SuccessFactors’ conversion claim is not actionable because SuccessFactors’ intangible

4 product and pricing information is not capable of an exclusive right to possession or control, and

5 because SuccessFactors has not been deprived of that information resulting in any damages.

6 (a) Intangible product and pricing information is not capable of


exclusive possession, nor does Successfactors have a legitimate
7 claim to exclusivity.
8 The Ninth Circuit has recognized that both tangible and intangible property are properly
9 the subject of a claim for conversion. See Kremen v. Cohen, 337 F.3d 1024 (9th Cir. 2003). The

10 court in Kremen relied upon a three-part test to determine whether the intangible property right at

11 issue was properly the subject of a claim for conversion: “First, there must be an interest capable

12 of precise definition; second, it must be capable of exclusive possession or control; and third, the

13 putative owner must have established a legitimate claim to exclusivity.” Id. at 1030. Examples of

14 intangible property that have been held to be properly the subject of a claim for conversion include

15 music recordings, intellectual property rights in radio shows, customer lists where portions of the

16 information on the lists were destroyed, regulatory filings, and domain names. Id. at 1032-33.

17 California courts have cautioned, however, that the expansion of conversion law to reach

18 intangible property should not be permitted to “displace other, more suitable law.” Fremont

19 Indem. Co., 148 Cal. App. 4th at 124.

20 Here, SuccessFactors claims that its “product and pricing information” has been converted

21 by Halogen. Complaint ¶ 46. However, its “product and pricing information” is presumably

22 known by, and has been provided to, its “over 3,000 customers in more than sixty industries”—not

23 to mention all the sales prospects like The Magnus Group that have received this information but

24 did not become a SuccessFactor customer. See Complaint ¶ 11. Such information that is freely

25 given out to prospective customers is not “capable of exclusive possession or control,” nor does

26 the “putative owner [Plaintiff here] have established a legitimate claim to exclusivity.” Kremen,

27 337 F.3d at 1030. Indeed, SuccessFactors is not alleging in this litigation that it has an exclusive

28
04372.51777/3871926.4 Case No. :10-CV-05471-SBA
-18-
HALOGEN SOFTWARE INC.’S MEMORANDUM OF POINTS AND
AUTHORITIES IN SUPPORT OF MOTION TO DISMISS
Case4:10-cv-05471-SBA Document27 Filed12/27/10 Page26 of 32

1 trade secret property right to this information, or that it takes steps to maintain the exclusive right

2 to this information, such as insisting on non-disclosure agreements with potential customers.

3 Further, SuccessFactors cannot use its conversion of intangible property claim to “displace

4 other suitable law.” Fremont Indem. Co., 148 Cal. App. 4th at 124. The suitable law for its

5 allegations is CUTSA, which occupies the field in this area and preempts all other common law

6 claims for the improper acquisition and use of information of value. See K.C. Multimedia, Inc.,

7 171 Cal. App. 4th at 957 (“CUTSA’s ‘comprehensive structure and breadth’ suggests a legislative

8 intent to occupy the field”); see also discussion in Part III.C., supra.

9 (b) SuccessFactors’ Retention Of Copies Of Documents Defeat Its


Conversion Claim
10
SuccessFactors’ conversion claim also fails to state a claim because it has retained copies
11
of the product and pricing information it provided to The Magnus Group. In FMC Corp. v.
12
Capital Cities/ABC, Incl., 915 F.2d 300, 303-304 (7th Cir. 1990), the Seventh Circuit, construing
13
California law, found that “the receipt of copies of documents, rather than the documents
14
themselves, should not ordinarily give rise to a claim for conversion.” The court stated that “[t]he
15
reason for this rule is that the possession of copies of documents-as opposed to the documents
16
themselves-does not amount to an interference with the owner’s property sufficient to constitute
17
conversion. In cases where the alleged converter has only a copy of the owner’s property and the
18
owner still possesses the property itself, the owner is in no way being deprived of the use of his
19
property. The only rub is that someone else is using it as well.” Id; see also Pearson v. Dodd, 410
20
F.2d 701, 707 (D.C. Cir. 1969) (“It is clear that on the agreed facts appellants committed no
21
conversion of the physical documents taken from appellee’s files. Those documents were
22
removed from the files at night, photocopied, and returned to the files undamaged before office
23
operations resumed in the morning. Insofar as the documents’ value to appellee resided in their
24
usefulness as records of the business of his office, appellee was clearly not substantially deprived
25
of his use of them.”).
26
Here, the Scott Larkins declaration that SuccessFactors submitted in support of its TRO
27
Motion provides the death knell for SuccessFactors’ conversion claim, because he admits to
28
04372.51777/3871926.4 Case No. :10-CV-05471-SBA
-19-
HALOGEN SOFTWARE INC.’S MEMORANDUM OF POINTS AND
AUTHORITIES IN SUPPORT OF MOTION TO DISMISS
Case4:10-cv-05471-SBA Document27 Filed12/27/10 Page27 of 32

1 attaching “true and correct copies” of various emails allegedly forwarding the very information

2 Halogen is accused of converting. (See, e.g., Declaration of Scott Larkins in Support of Motion

3 for Temporary Restraining Order ¶ 33 and Exh. Q, ¶ 38 and Exhibit S [Dkt. 13]3; see also

4 Complaint ¶ 30 (referencing the September 9, 2010 email described in the Larkins Decl. at ¶ 38

5 and attached as Exhibit S).

6 Because SuccessFactors’ product and pricing information is not subject to exclusive

7 possession, nor can SuccessFactors show that Halogen permanently deprived it of that

8 information, the Court should dismiss the conversion claim.

9 3. SuccessFactors’ Fraud And Deceit Claim Fails To State A Cognizable


Cause Of Action
10
To succeed on a fraud and deceit claim under California law, Plaintiff must show: “(a)
11
misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity
12
(or ‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e)
13
resulting damage.” KEMA, Inc. v. Koperwhats, 2010 WL 3464708, at *6 (N.D. Cal. 2010)
14
(internal quotation and citation omitted) (emphasis added); Conrad v. Bank of America, 45 Cal.
15
App. 4th 133, 156 (Cal. App. 1996).
16
Courts in this district have routinely held that all the required elements (including reliance
17
and damages) must be pled with specificity under Federal Rule of Civil Procedure 9(b). See e.g.,
18
Roque v. Suntrust Mortg., Inc., 2010 WL 546896, *5 (N.D. Cal. 2010) (“In order to state a claim
19
for fraud, plaintiff must plead the following elements with specificity: (1) false representation as to
20
a material fact; (2) knowledge of falsity; (3) intent to defraud; (4) justifiable reliance and resulting
21
damages”); Applied Elastomerics, Inc. v. Z-Man Fishing Prods., Inc., 2007 WL 703606, *3 (N.D.
22
Cal. March 5, 2007) (“In order to state an affirmative defense for fraud, Defendant must plead
23
with specificity the following elements: misrepresentation, scienter, intent to defraud, justifiable
24
reliance and resulting damage.”). As the court held when dismissing plaintiff’s fraud claim on
25

26 3
Halogen respectfully requests that the court to take judicial notice of the Larkins declaration
27 pursuant to Federal Rule of Evidence 201 for all the reasons cited in Halogen’s Request for
Judicial Notice filed herewith.
28
04372.51777/3871926.4 Case No. :10-CV-05471-SBA
-20-
HALOGEN SOFTWARE INC.’S MEMORANDUM OF POINTS AND
AUTHORITIES IN SUPPORT OF MOTION TO DISMISS
Case4:10-cv-05471-SBA Document27 Filed12/27/10 Page28 of 32

1 Rule 9(b) grounds in Roque, “such [fraud] actions require a strict pleading standard and a liberal

2 construction will not be invoked to sustain a pleading defective in any material respect.” Roque,

3 2010 WL 546896 at *5 (emphasis added).

4 SuccessFactors’ fraud and deceit claim must be dismissed because it has not alleged a

5 cognizable injury, or the extent injury is pled, it is not pled with particularity under Rule 9(b).

6 (a) Successfactors does not plead a cognizable injury.


7 SuccessFactors has failed to plead any damage resulting from the alleged fraud and
8 misrepresentation. “In an action for [common law] fraud, damage is an essential element of the

9 cause of action.” Patrick v. Alacer Corp., 167 Cal. App. 4th 995, 1016-1017 (2008).

10 Misrepresentation, even maliciously committed, does not support a cause of action unless the

11 plaintiff suffered consequential damages. Conrad, 45 Cal. App. 4th at 159. Thus, a plaintiff

12 asserting fraud must plead actual, concrete damages to sustain a claim of fraud. See Lusa

13 Lighting, Int'l, Inc. v. Am. Elex, Inc., 2008 WL 4350741, at *9 (C.D. Cal. 2008) (“neither nominal

14 damages nor loss of profits satisfy the element of damages in a fraud claim”); Rasidescu v.

15 Midland Credit Mgmt., Inc., 435 F. Supp. 2d 1090, 1097 (S.D. Cal. 2006) (“In California,

16 recovery under common law fraud is limited to ‘actual damages suffered by the plaintiff.’ ‘Actual’

17 is defined as ‘existing in fact or reality,’ as contrasted with ‘potential’ or ‘hypothetical,’ and as

18 distinguished from ‘apparent’ or ‘nominal.’).

19 Here, SuccessFactors has not alleged any actual, concrete damages. Again, SuccessFactors

20 has not identified any lost customers, lost profits, lost market share, or any other tangible injury.

21 Rather, SuccessFactors claims that Halogen’s receipt of SuccessFactors’ “proprietary” information

22 has “undermined, and will only continue to undermine, SuccessFactors’ sales efforts with other

23 customers and prospective customers . . . . [C]ontinued use of the pricing and product information

24 it wrongfully obtained will cost considerable, untold sales, as well as injury to [SuccessFactors]

25 goodwill.” Complaint ¶ 35. Such claims are vague and speculative, and, thus, insufficient to state

26 a claim of fraud. See Lusa Lighting, Int'l, Inc., 2008 WL 4350741, at *9; Rasidescu, 435

27 F.Supp.2d at 1097(“In California, recovery under common law fraud is limited to ‘actual damages

28
04372.51777/3871926.4 Case No. :10-CV-05471-SBA
-21-
HALOGEN SOFTWARE INC.’S MEMORANDUM OF POINTS AND
AUTHORITIES IN SUPPORT OF MOTION TO DISMISS
Case4:10-cv-05471-SBA Document27 Filed12/27/10 Page29 of 32

1 suffered by the plaintiff.’ ‘Actual’ is defined as ‘existing in fact or reality,’ as contrasted with

2 ‘potential’ or ‘hypothetical,’ and as distinguished from ‘apparent’ or ‘nominal.’)..

3 (b) Successfactors fails to adequately plead reliance.


4 Even if these claims could be considered “concrete,” SuccessFactors has failed to allege
5 how these purported "damages" have resulted from its reliance on Halogen’s alleged

6 misrepresentations. Particularly, SuccessFactors has not alleged that Halogen has used the

7 allegedly procured information to SuccessFactors' detriment. SuccessFactors has not alleged any

8 facts showing that Halogen used SuccessFactors' information to improve its product, cut its prices,

9 or provide false information to SuccessFactors' customers or potential customers. As noted above,

10 SuccessFactors has not even shown that Halogen has interfered with any of SuccessFactors’

11 potential or actual customer relationships. At most, SuccessFactors has alleged that Halogen’s

12 alleged misrepresentations while posing as The Magnus Group could possibly or hypothetically

13 lead to some kind of harm. This is insufficient to state a claim for relief. See Rasidescu, 435 F.

14 Supp. 2d at 1097; Interserve, Inc. v. Fusion Garage PTE. LTD.,2010 WL 3339520, at *9 (N.D.

15 Cal. 2010) (dismissing fraud claim because plaintiff “has not alleged with adequate specificity

16 how and to what extent it reasonably relied on each alleged misrepresentation and was damaged

17 thereby”); Roque, 2010 WL 546896 at *5 (“[S]uch [fraud] actions require a strict pleading

18 standard and a liberal construction will not be invoked to sustain a pleading defective in any

19 material respect.”).

20 Further, any injury that SuccessFactors could allege would be an inevitable result of its

21 own failure to adequately protect its “confidential,” “non-public,” and “proprietary” information.

22 Where damages are “otherwise inevitable or due to unrelated causes,” no liability attaches.

23 Goehring v. Chapman Univ., 121 Cal. App. 4th 353, 365 (2004) (quoting Kruse v. Bank of Am.,

24 202 Cal. App. 3d 38, 60 (1988). In Goehring, Chapman University induced the plaintiff to enroll

25 in the University through various misrepresentations concerning its accreditation. Id. at 363-64.

26 The Court denied the fraud claim because it determined that Goehring’s damages resulted from his

27 academic dismissal, rather than Chapman's misrepresentations. Id. at 364-65. In Kruse, 202 Cal.

28 App. 3d at 61, the court held that even though defendant’s promise may have been false and
04372.51777/3871926.4 Case No. :10-CV-05471-SBA
-22-
HALOGEN SOFTWARE INC.’S MEMORANDUM OF POINTS AND
AUTHORITIES IN SUPPORT OF MOTION TO DISMISS
Case4:10-cv-05471-SBA Document27 Filed12/27/10 Page30 of 32

1 fraudulent, plaintiffs’ property loss was the result of their own self-created indebtedness rather

2 than the defendant’s actions.

3 Just as in Goehring and Kruse, SuccessFactors’ vague and speculative alleged injury would

4 be inevitable and the result of its own actions rather than Halogen’s alleged misrepresentations.

5 SuccessFactors freely distributes its product and pricing information to potential customers and

6 does not control the subsequent dissemination of that information. Thus, SuccesssFactors cannot

7 reasonably allege that Halogen’s alleged receipt of this very same information can cause any

8 unique damage to SuccessFactors that it has not already subjected itself to. SuccessFactors' fraud

9 and deceit claim should be dismissed.

10 4. SuccessFactors’ Unfair Competition Claim Fails To State A Cognizable


Cause Of Action
11
In its final claim for relief, SuccessFactors asserts that Halogen’s alleged misconduct
12
constitutes unlawful, unfair, and fraudulent business practices in violation of California Business
13
and Professions Code section 17200. SuccessFactors alleges that Halogen has committed
14
unlawful practices based on SuccessFactors’ claims of interference with prospective economic
15
relations, conversion, and fraud. Complaint ¶ 63. SuccessFactors further alleges that Halogen
16
committed fraudulent business practices through communications with SuccessFactors’ customers.
17
Id. at ¶ 64. Finally, SuccessFactors alleges that Halogen has engaged in unfair business practices,
18
which it does not list, but includes “intentionally diverting SuccessFactor’s customers.” Id. at 65.
19
For the reasons set forth below, each of these allegations fails to state a cognizable claim against
20
Halogen.
21
(a) Successfactors’ unfair competition claim is unsupported without
22 an actionable unlawful act.
23 The California Supreme Court has explained that “[b]y proscribing any unlawful business

24 practice, section 17200 ‘borrows’ violations of other laws and treats them as unlawful practices

25 that the unfair competition law makes independently actionable.” Cel-Tech Comm’ns, Inc. v. Los

26 Angeles Cellular Telephone Co., 20 Cal. 4th 163, 180 (1999) (internal quotations omitted). Thus,

27 in order to violate the “unlawful” prong of section 17200, a plaintiff must show that a defendant

28 has committed some illegal act. Here, SuccessFactors bases its allegation of unlawful business
04372.51777/3871926.4 Case No. :10-CV-05471-SBA
-23-
HALOGEN SOFTWARE INC.’S MEMORANDUM OF POINTS AND
AUTHORITIES IN SUPPORT OF MOTION TO DISMISS
Case4:10-cv-05471-SBA Document27 Filed12/27/10 Page31 of 32

1 practices on its claims of intentional interference, conversion, and fraud. However, as described in

2 the sections above, each of these claims fail to state a claim and should be dismissed. Because

3 SuccessFactors’ unfair competition claim turns on the viability of its other claims, it too must be

4 dismissed. See Interserve, 2010 WL 3339520, at *9 (N.D. Cal. 2010) (dismissing plaintiff’s

5 unfair competition claim because it “rises and falls with [plaintiff’s] ability to allege” unlawful

6 conduct).

7 (b) Successfactors has not identified the purported statements


communicated to its customers or to the public.
8
SuccessFactors’ allegation that Halogen has committed fraudulent business practices also
9
fails to present a cognizable cause of action. To state a cause of action for fraudulent business
10
practices under section 17200, a plaintiff must show that the defendant committed acts that were
11
likely to deceive the public. See Searle v. Wyndham Int’l Inc., 102 Cal. App. 4th 1327, 1333 (Cal.
12
App. 2002) (“[A] plaintiff need not plead and prove the elements of [fraud to claim that a business
13
practice is fraudulent under section 17200]. Instead, one must allege that members of the public
14
are likely to be deceived.”) (internal quotations omitted). While SuccessFactors asserts that
15
Halogen has made “statements . . . to SuccessFactors’ customers and to the public,” (Complaint at
16
¶ 64), SuccessFactors has not identified a single fraudulent or deceptive statement made by
17
Halogen to SuccessFactors’ customers or to the public. Thus, SuccessFactors’ claim is not only
18
unfounded, but also fails to put Halogen on notice of the particular claim asserted against it. See
19
Fed. R. Civ. P. 12(e).
20
Moreover, SuccessFactors has not alleged any misconduct that would give rise to a
21
fraudulent business practices claim. Merely making statements to SuccessFactors’ customers is
22
not a fraudulent business practice—it is competition. SuccessFactors cannot claim that Halogen
23
has engaged in fraudulent business practices merely because the two are competitors, rather it
24
must show that Halogen has committed acts that are likely to deceive the public. See Searle, 102
25
Cal. App. 4th at 1333. It has not. Thus, its fraudulent business practices claim fails to state a
26
cognizable cause of action.
27
(c) Successfactors has not alleged an incipient violation of an
28 antitrust law.
04372.51777/3871926.4 Case No. :10-CV-05471-SBA
-24-
HALOGEN SOFTWARE INC.’S MEMORANDUM OF POINTS AND
AUTHORITIES IN SUPPORT OF MOTION TO DISMISS
Case4:10-cv-05471-SBA Document27 Filed12/27/10 Page32 of 32

1 Finally, SuccessFactors’ allegation that Halogen has engaged in unfair business practices

2 fails to state a claim because Halogen’s alleged misconduct presents no harm to competition. As

3 explained by the California Supreme Court:

4 When a plaintiff who claims to have suffered injury from a direct


competitor’s “unfair” act or practice invokes section 17200, the
5 word “unfair” in that section means conduct that threatens an
incipient violation of an antitrust law, or violates the policy or spirit
6 of one of those laws because its effects are comparable to or the
same as a violation of the law, or otherwise significantly threatens or
7 harms competition.

8 Cel-Tech Comm’ns, 20 Cal. 4th at 187. Here, SuccessFactors has claimed no violation of antitrust

9 or quasi-antitrust laws. It has claimed only that Halogen posed as a potential customer to obtain

10 product and pricing information. Further, SuccessFactors has not alleged any facts showing that

11 Halogen’s actions have affected SuccessFactors’ ability to compete in the market, or that

12 competition has been affected in the twenty-plus competitor market in which the two parties

13 compete. See Complaint ¶ 13. The United States Supreme Court has stressed that the “antitrust

14 laws . . . were enacted for the protection of competition, not competitors.” Id. (citing Cargill, Inc.

15 v. Monfort of Colorado, Inc., 479 U.S. 104, 115 (1986)). Thus, where harm is merely to a

16 competitor and not competition, there is no violation of antitrust laws. See id. Similarly, there is

17 no violation of section 17200 for unfair business practices where a defendant’s actions present no

18 harm to competition.

19 IV. CONCLUSION
20 For the foregoing reasons, Halogen respectfully request that the Court dismiss

21 SuccessFactors’ Complaint with prejudice.

22

23 DATED: December 27, 2010 QUINN EMANUEL URQUHART &


SULLIVAN, LLP
24

25

26 By /s/ Claude M. Stern


Claude M. Stern
27 Attorneys for Defendants
Halogen Software, Inc.
28
04372.51777/3871926.4 Case No. :10-CV-05471-SBA
-25-
HALOGEN SOFTWARE INC.’S MEMORANDUM OF POINTS AND
AUTHORITIES IN SUPPORT OF MOTION TO DISMISS