Phonexa Holdings v. O'Connor CA2/5 ( 2022 )

Filed 8/26/22 Phonexa Holdings v. O’Connor CA2/5
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on
opinions not certified for publication or ordered published, except as specified by rule
8.1115(b). This opinion has not been certified for publication or ordered published for
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FIVE
PHONEXA HOLDINGS, LLC, B308548
Plaintiff and Respondent, (Los Angeles County
Super. Ct. No.
v. 20STCV29922)
RACHEL O’CONNOR et al.,
Defendants and Appellants.
APPEAL from an order of the Superior Court of Los
Angeles County, Richard L. Fruin, Jr., Judge. Vacated and
remanded with directions.
Warren Terzian, Tom Warren, Dan Terzian, and Erick
Kuylman for Defendants and Appellants.
Law Office of Steven R. Friedman, Steven R. Friedman,
and Michael E. Friedman for Plaintiff and Respondent.
Plaintiff Phonexa Holdings, LLC (Phonexa) hired
defendant Rachel O’Connor (O’Connor) as its chief marketing
officer in February 2020. Phonexa fired her a few months later,
after she raised concerns about the company’s compliance with
COVID-19 public health measures, and then sued her and her
husband, Sean Halley (Halley), for copying data from a company-
owned computer after she was fired. In a special motion to strike
pursuant to Code of Civil Procedure section 425.16,1 the anti-
SLAPP statute, O’Connor and Halley contended they copied the
data in preparation to bring various employment claims against
Phonexa—claims that O’Connor did in fact assert against the
company in a cross complaint after Phonexa was the first to file
suit. In this appeal from the trial court’s order denying the
special motion to strike, we consider whether Phonexa’s claims
arise from protected petitioning activity and whether they have
minimal merit.
I. BACKGROUND
A. Phonexa’s Complaint
Phonexa filed its complaint against O’Connor and Halley in
August 2020; the gist of the lawsuit is that they stole proprietary
information from the company. Among other things, Phonexa
alleged O’Connor’s relationship with senior management at the
company deteriorated and she took two days off work starting on
July 20, 2020, during which she “cop[ied] the hard drive of her
work computer to a series of personal external hard drives and
thumb drives” with help from her husband, Halley. Phonexa
1
Undesignated statutory references that follow are to the
Code of Civil Procedure.
2
terminated O’Connor’s employment on July 22, 2020, and
Phonexa further alleged O’Connor copied the electronic materials
at the direction of Leslie Rosario (Rosario), vice president of
human resources at Informa Markets Manufacturing, LLC
(Informa), to steal Phonexa’s trade secrets.2
Phonexa’s specific causes of action against O’Connor are for
breaching confidentiality agreements, breach of fiduciary duty,
violation of the Computer Fraud and Abuse Act (CFAA) (18
U.S.C. § 1030), violation of California’s analogue of the CFAA
(Pen. Code, § 502), misappropriation of trade secrets, violation of
the Unfair Competition Law (Bus. & Prof. Code, § 17200), receipt
of stolen property (Pen. Code, § 496), and conversion.
B. O’Connor’s Cross Complaint
O’Connor filed a cross complaint asserting multiple
employment claims against Phonexa. O’Connor alleged that
Phonexa’s chief executive officer, David Gasparyan (Gasparyan),
initially authorized Phonexa employees to work from home in
compliance with state-wide stay-at-home orders issued in
response to COVID-19, but several members of O’Connor’s
marketing team continued to work from Phonexa’s offices and
Gasparyan “would question and interrogate employees who were
working from home.” Gasparyan dismissed COVID-19 as a
“hoax” and, when O’Connor shared employee concerns regarding
Phonexa’s return-to-work policy with human resources,
2
Rosario and Informa are named as defendants in the
complaint but they were not parties to the motion at issue in this
appeal.
3
Gasparyan demanded the complaining employees’ names and
threatened retaliation.
O’Connor’s cross-complaint further alleged that she has
various risk factors making her particularly vulnerable to
COVID-19 and that she worked remotely during her tenure at
Phonexa. During a July 20, 2020, phone call, O’Connor alleged
Gasparyan “berated and belittled” her and “falsely accus[ed] her
of forcing her direct reports to work from home . . . .” O’Connor
alleged her termination on July 22, 2020, came only hours after
she “sent a formal written complaint to [Phonexa] via email,” that
raised “various health and safety issues, including [Phonexa’s]
non-compliance with state-mandated rules and regulations” and
accusing Phonexa of retaliation and harassment.
O’Connor’s specific causes of action against Phonexa are for
wrongful termination in violation of public policy, retaliation in
violation of Labor Code sections 1102.5 and 6310, violation of
Labor Code section 6400, violation of the Unfair Competition
Law, disability discrimination, failure to accommodate, and
failure to engage in the interactive process.
C. O’Connor and Halley’s Anti-SLAPP Motion
After O’Connor filed her cross complaint, O’Connor and
Halley filed a special motion to strike Phonexa’s complaint in its
entirety or, in the alternative, each of the various claims against
them. They contended their copying of company data, which
served as the basis for all of Phonexa’s claims against them, was
undertaken in anticipation of litigation and qualified as protected
activity under the anti-SLAPP statute. They further contended
Phonexa could not demonstrate its claims against them have
minimal merit because (1) free speech and petition guarantees
4
are a complete defense; (2) several of Phonexa’s claims are
superseded by the trade secrets claim, which is itself preempted
by federal law; and (3) the contract claims fail because the
relevant agreements are unenforceable.3
O’Connor submitted a declaration detailing the
circumstances of her departure from Phonexa.4 According to her
declaration, after a July 20, 2020, phone call concerning the
company’s COVID-19 policies, O’Connor “sense[d]
that . . . Gasparyan was going to fire [her] over [her] following the
law and the General Counsel’s directions.” She called her lawyer
3
We omit arguments O’Connor and Halley have abandoned
on appeal.
4
This declaration attached several exhibits reflecting
Gasparyan’s attitude toward COVID-19 precautions and the
pressure that O’Connor and others felt to return to the office.
These include, for example, an email Gasparyan sent to O’Connor
stating that, “when it comes to working from the home or the
office – I decide that, NO ONE ELSE and that’s not the
department heads decision or encouragement. [¶]
Additionally, it should not matter for a department head if the
employee works from home or the office, as long as they want to
come to the office. That’s the bottom line so let[’]s make their life
easier than what they have been facing during the Government’s
massive control of the population and the entire inconsistency of
their guidelines. . . . You still can work from home until we hear
the Government’s next guidelines – once it’s open and all this
crap is over then I will request you to come to the office on a daily
basis . . . .” In a similar vein, O’Connor received emails from
Phonexa’s head of human resources which included messages
from Gasparyan demanding the names of employees raising
concerns about Phonexa’s COVID-19 policies so he could “cut[ ]
the fat.”
5
to discuss a potential unlawful retaliation lawsuit against the
company. Then, on July 22, 2020, O’Connor sent Gasparyan and
other senior executives an email that stated, among other things,
that “[t]he workplace is not safe to return to, with no enforced
social distancing guidelines, no mandatory mask requirements,
and the requirement that employees sign a waiver of liability in
the event they get sick to any degree, including death. The
workplace is not safe at this time, and there is a mandate that
those who work from home do so.” Less than two hours later,
Lilit Davtyan (Davtyan), Phonexa’s executive vice president and
chief financial officer, fired O’Connor. According to O’Connor’s
declaration, Davtyan said Phonexa would send a courier to collect
her company-issued computer, and O’Connor “then copied
data . . . for [her] lawsuit against Phonexa and . . . Gasparyan.”
O’Connor did so because she “feared that Phonexa would delete
the data” and believed it “was critical to [her] consulting with
lawyers about [her] rights and [her] claims.”
O’Connor’s declaration stated Phonexa’s courier arrived to
retrieve her computer around 3:30 p.m. Prior to the courier’s
arrival, O’Connor “had various calls with HR about paperwork”
and communicated with members of the marketing department
with whom she “had previously scheduled meetings.” O’Connor
was paid for the full day and believed she was authorized to
access company data until the workday ended at 5:00 p.m.
O’Connor’s company-issued computer was also linked to her
personal Apple iCloud and iMessage accounts. With these links,
Phonexa would have been able to see text messages she
exchanged with Rosario discussing “Gasparyan’s unlawful
conduct; [O’Connor’s] speaking with a lawyer about a retaliation
lawsuit against Phonexa; and [her] copying certain data for
6
proving Phonexa’s unlawful conduct and providing to [her]
lawyer.”5
Halley submitted a declaration explaining that after
O’Connor told him “she had just been fired from Phonexa,” he
helped her “creat[e] a cloned copy of her hard drive.” Halley did
not review the information on the hard drive. O’Connor’s “sole
aim was copying email and Skype communications,” and she
believed that if she and Halley “inadvertently” copied other
material, “Phonexa’s documents were stored on the cloud” and
she would no longer be able to open copied hyperlinks when her
credentials were deactivated. In a supplemental declaration,
O’Connor acknowledged she “sometimes downloaded local copies
from the cloud to [her] laptop.”
Both O’Connor and Halley averred they gave the copied
data only to O’Connor’s attorneys. The only Phonexa materials
O’Connor reviewed following her termination were
communications relating to her termination.
D. Phonexa’s Opposition to the Anti-SLAPP Motion
Phonexa argued O’Connor and Halley did not satisfy their
initial burden of demonstrating Phonexa’s claims arose from
protected activity because (1) Phonexa’s complaint did not
mention activity taken in anticipation of litigation and (2) the
relevant conduct was illegal as a matter of law. In the
alternative, Phonexa contended its claims had minimal merit.
Davtyan (the executive who fired O’Connor) stated in a
declaration that O’Connor gave “instructions to employees which
5
O’Connor attached excerpts of these communications to
her declaration.
7
[Davtyan] and the CEO [Gasparyan] viewed as contrary to
Phonexa’s established policies and the chain of command.”
Following the July 20, 2020, call during which “Gasparyan
attempted to clear up with the marketing team the confusion
created by O’Connor regarding the work from home policy,”
Davtyan and Gasparyan reviewed O’Connor’s computer usage
and became concerned that she was researching how to export
data. Davtyan stated the discovery that O’Connor “was exploring
how to export Phonexa information[ ] contributed significantly to
her termination.” Davtyan called O’Connor at approximately
9:00 a.m. on July 22, 2020, to tell her “that her employment at
Phonexa was terminated immediately” and she no longer had
permission to access Phonexa data. Phonexa’s general counsel,
Michael Cordova (Cordova), sent O’Connor an email the same
morning reiterating these points.6 (Cordova’s email is not
included as an exhibit to Davtyan’s declaration and it is not
discussed in Cordova’s declaration.) Davtyan asserted Phonexa
was not aware O’Connor was contemplating a lawsuit against
Phonexa when she was terminated.
A consultant hired to perform a forensic examination of
O’Connor’s computer, Michael Garlie (Garlie), stated someone
using O’Connor’s credentials installed (and later deleted)
software used to clone the hard drive after 9:00 a.m. on July 22,
2020. Garlie prepared a list of the files that were on O’Connor’s
6
In a declaration filed with her reply brief, O’Connor stated
that Davtyan “left [her] with a task to complete at Phonexa later
that day” and did not revoke her permission to access data on her
Phonexa-issued computer. O’Connor further stated Cordova’s
email was sent at 10:50 a.m. and she did not see it for several
hours.
8
computer, including both “program or system files and other files
which do not contain Phonexa data” and “at least
300 . . . files . . . [were] easily identifiable as Phonexa data
because they . . . contain a regular language descriptive name
and are PDF, Word, Excel, or PowerPoint files . . . .” Garlie billed
Phonexa $9,883.30 for his work.
Davtyan and another employee in Phonexa’s marketing
department reviewed Garlie’s list of files and identified several
that included sensitive business information unrelated to
Phonexa’s COVID-19 policies. These include, for example, a
spreadsheet listing Phonexa’s clients, a marketing budget
spreadsheet, marketing strategy materials, and passwords to
various marketing and social media accounts.
E. The Trial Court’s Ruling on O’Connor and Halley’s
Anti-SLAPP Motion
The trial court denied O’Connor and Halley’s anti-SLAPP
motion based on its conclusion that Phonexa’s claims against
O’Connor and Halley do not arise from protected activity because
the complaint “makes no mention of [O’Connor and Halley’s]
allegedly using the information copied from [Phonexa’s] computer
in connection with the preparation of a lawsuit.” The trial court
emphasized this was “particularly true” with respect to Halley
because he was not a plaintiff in O’Connor’s action against
Phonexa.
The trial court further found, in the alternative, that even
if O’Connor and Halley could meet their burden to show
Phonexa’s claims arise from protected activity, Phonexa’s claims
have minimal merit. The court concluded O’Connor and Halley’s
actions are not protected free speech or petitioning conduct
9
because “‘self-help’ theft of data under the pretext of fear that
such data may be lost isn’t protected” and, in any case, the
“grav[a]men of this action is essentially property theft.” The
court further found the claims that O’Connor and Halley argued
were superseded by statute are not in fact superseded and there
was no need to address the breach of contract claim because
O’Connor and Halley’s motion “asks the Court to strike the
Complaint—it does NOT ask that any particular causes of action
be stricken.”
II. DISCUSSION
Under our Supreme Court’s decision in Wilson v. Cable
News Network, Inc. (2019) 7 Cal.5th 871 (Wilson), O’Connor and
Halley’s declarations suffice to make a prima facie showing that
they copied data from O’Connor’s company-issued computer in
connection with litigation contemplated seriously and in good
faith. Contrary to Phonexa’s contention, the record does not
establish O’Connor and Halley’s conduct was criminal as a
matter of law, and thus, there is no concern that they are
ineligible for anti-SLAPP protection under the rule announced in
Flatley v. Mauro (2006) 39 Cal.4th 299 (Flatley). That means
O’Connor and Halley satisfy the first step of anti-SLAPP
analysis, i.e., a prima facie showing that the claims asserted
against them arise from activity protected by the anti-SLAPP
statute. We accordingly proceed to the second step of the anti-
SLAPP inquiry and conclude some—but not all—of Phonexa’s
claims satisfy the anti-SLAPP “minimal merit” (Baral v. Schnitt
(2016) 1 Cal.5th 376, 385, 391) threshold. We will therefore
vacate the trial court’s order and remand with directions.
10
A. Legal Framework
The anti-SLAPP statute “authorizes a special motion to
strike a claim ‘arising from any act of [the moving party] in
furtherance of [the party’s] right of petition or free speech under
the United States Constitution or the California Constitution in
connection with a public issue.’ (§ 425.16, subd. (b)(1).)” (Wilson,
supra, 7 Cal.5th at 884.) The statute “‘does not insulate
defendants from any liability for claims arising from the
protected rights of petition or speech. It only provides a
procedure for weeding out, at an early stage, meritless claims
arising from protected activity.’” (Monster Energy Co. v.
Schechter (2019) 7 Cal.5th 781, 788 (Monster Energy).)
“‘Resolution of an anti-SLAPP motion involves two steps.
First, the defendant must establish that the challenged claim
arises from activity protected by section 425.16. [Citation.] If the
defendant makes the required showing, the burden shifts to the
plaintiff to demonstrate the merit of the claim by establishing a
probability of success. [Our Supreme Court has] described this
second step as a “summary-judgment-like procedure.” [Citation.]
The court does not weigh evidence or resolve conflicting factual
claims. Its inquiry is limited to whether the plaintiff has stated a
legally sufficient claim and made a prima facie factual showing
sufficient to sustain a favorable judgment. It accepts the
plaintiff's evidence as true, and evaluates the defendant’s
showing only to determine if it defeats the plaintiff's claim as a
matter of law. [Citation.] “[C]laims with the requisite minimal
merit may proceed.”’ [Citation.]” (Monster Energy, supra, 7
Cal.5th at 788.)
Our review of the denial of an anti-SLAPP motion is de
novo. (Monster Energy, supra, 7 Cal.5th at 788.)
11
B. First Prong: Phonexa’s Claims Against O’Connor and
Halley Arise from Anti-SLAPP Protected Activity
“The defendant’s first-step burden is to identify the activity
each challenged claim rests on and demonstrate that that activity
is protected by the anti-SLAPP statute. A ‘claim may be struck
only if the speech or petitioning activity itself is the wrong
complained of, and not just evidence of liability or a step leading
to some different act for which liability is asserted.’ [Citation.]
To determine whether a claim arises from protected activity,
courts must ‘consider the elements of the challenged claim and
what actions by the defendant supply those elements and
consequently form the basis for liability.’ [Citation.] Courts then
must evaluate whether the defendant has shown any of these
actions fall within one or more of the four categories of ‘“act[s]”’
protected by the anti-SLAPP statute. [Citations.]” (Wilson,
supra, 7 Cal.5th at 884.)
Courts “have adopted a fairly expansive view of what
constitutes litigation-related activities within the scope of section
425.16” (Kashian v. Harriman (2002) 98 Cal.App.4th 892, 908),
including “the prelitigation investigation of a potential claim.”
(Tichinin v. City of Morgan Hill (2009) 177 Cal.App.4th 1049,
1069 (Tichinin) [“we can think of few better ways to burden [the
right of petition] than to make it difficult and perhaps legally
risky for people to investigate and find evidence to support
potential claims”].) Significantly for Halley, a defendant moving
to strike under section 425.16 need not demonstrate their
12
petitioning activity was “on [their] own behalf.”7 (Briggs v. Eden
Council for Hope & Opportunity (1999) 19 Cal.4th 1106, 1115-
1116 [holding a defendant tenant counseling organization was
engaged in protected petitioning activity under anti-SLAPP
statute when, among other things, it provided advice to the
landlord plaintiffs’ tenant “in anticipation of litigation”] (Briggs);
accord, MMM Holdings, Inc. v. Reich (2018) 21 Cal.App.5th 167,
179 [“Nothing in subdivision (e)(4) limits the protected activity to
petitioning or speech on behalf of a particular client”] (MMM
Holdings); White v. Lieberman (2002) 103 Cal.App.4th 210, 221
[holding that Briggs’ “reasoning applies to an attorney acting on
behalf of his clients”].)
The trial court determined Phonexa’s claims against
O’Connor and Halley do not arise from petitioning activity
because the complaint “makes no mention of [O’Connor and
Halley] allegedly using the information copied from [Phonexa’s]
computer in connection with the preparation of a lawsuit” and
instead accuses them of illegally accessing Phonexa’s data “as
part of a conspiracy with [Informa] and [Rosario] . . . .” Crucially,
the trial court believed it must “accept[ ] [Phonexa’s] allegations”
at the first step of the anti-SLAPP analysis.
As our Supreme Court explained in Wilson, however, “[t]his
is not how the anti-SLAPP statute works. In deciding an anti-
SLAPP motion, a court must at the second step ‘“accept as true
the evidence favorable to the plaintiff.”’ [Citation.] But [the
Supreme Court has] never insisted that the complaint’s
7
Phonexa’s suggestion that Halley did not contend his
conduct was protected under section 425.16, subdivision (e) in the
trial court is incorrect.
13
allegations be given similar credence in the face of contrary
evidence at the first step. Such conclusive deference would be
difficult to reconcile with the statutory admonition that courts
must look beyond the pleadings to consider any party evidentiary
submissions as well. (§ 425.16, subd. (b)(2).)” (Wilson, supra, 7
Cal.5th at 887.) Courts do not defer to the complaint in assessing
the legal character of a defendant’s actions because “[w]hether it
is unlawful for a person to perform a particular action or engage
in a particular activity often depends on whether the person has
a good reason for doing it—or, at least, has no bad reason for
doing it.”8 (Id. at 886 [rejecting the proposition that if a plaintiff
alleges their former employer’s actions were prompted by
discriminatory or retaliatory motives, “the plaintiff’s allegation of
illicit motive will defeat any argument for anti-SLAPP
protection”].)
As we shall discuss when addressing the second (minimal
merit) stage of anti-SLAPP analysis, it is unclear whether
O’Connor and Halley will ultimately be able to make out a
successful free speech and petition defense to Phonexa’s claims.
But for purposes of the prima facie showing that must be made at
the first (protected activity) stage of analysis, the evidence
submitted by O’Connor and Halley satisfied their burden to show
they accessed and copied Phonexa’s data in furtherance of
protected petitioning rights and that this conduct supplies an
element of each of the claims against them. (Wilson, supra, 7
8
Phonexa’s contention that the “gravamen” of its complaint
is O’Connor and Halley’s theft of data rather than petitioning
activity relies on a now disfavored mode of analysis. (Bonni v. St.
Joseph Health System (2021) 11 Cal.5th 995, 1010.)
14
Cal.5th at 887.) The trial court therefore erred in concluding
Phonexa’s allegations (or the absence thereof) barred O’Connor
and Halley from making the requisite showing of protected
activity. (Id. at 892 [“If conduct that supplies a necessary
element of a claim is protected, the defendant’s burden at the
first step of the anti-SLAPP analysis has been carried, regardless
of any alleged motivations that supply other elements of the
claim”].)
Phonexa responds by citing established law that the
protection afforded to pre-litigation investigation activity does
not give prospective litigants carte blanche to engage in unlawful
conduct. Our Supreme Court held in Flatley, supra, 39 Cal.4th
299, that “where a defendant brings a motion to strike under
section 425.16 based on a claim that the plaintiff’s action arises
from activity . . . in furtherance of the defendant’s exercise of
protected speech or petition rights, but either the defendant
concedes, or the evidence conclusively establishes, that the
assertedly protected speech or petition activity was illegal as a
matter of law, the defendant is precluded from using the anti-
SLAPP statute to strike the plaintiff’s action.” (Id. at 320, italics
added; accord, City of Montebello v. Vasquez (2016) 1 Cal.5th 409,
423-424.) Thus, in Flatley, our Supreme Court held that an
attorney defendant could not invoke the anti-SLAPP statute in
an action concerning a purported pre-litigation settlement
demand that amounted to criminal extortion as a matter of law.
(Flatley, supra, at 332.) Similarly, in Gerbosi v. Gaims, Weil,
West & Epstein, LLP (2011) 193 Cal.App.4th 435, a defendant
law firm could not invoke the anti-SLAPP statute because there
was “no factual scenario” under which its “wiretapping in the
course of representing a client” would be “protected by the
15
constitutional guarantees of free speech and petition.” (Id. at
446.)
Several courts have held, and we agree, that the Flatley
rule is limited to conduct that is criminal as a matter of law. As
the Court of Appeal reasoned in Mendoza v. ADP Screening &
Selection Services, Inc. (2010) 182 Cal.App.4th 1644, “a reading of
Flatley to push any statutory violation outside the reach of the
anti-SLAPP statute would greatly weaken the constitutional
interests which the statute is designed to protect. . . . [A]
plaintiff’s complaint always alleges a defendant engaged in illegal
conduct in that it violated some common law standard of conduct
or statutory prohibition, giving rise to liability, and we decline to
give plaintiffs a tool for avoiding the application of the anti-
SLAPP statute merely by showing any statutory violation.” (Id.
at 1654; accord, Towner v. County of Ventura (2021) 63
Cal.App.5th 761, 771; Klem v. Access Ins. Co. (2017) 17
Cal.App.5th 595, 610; Finton Construction, Inc. v. Bidna & Keys,
APLC (2015) 238 Cal.App.4th 200, 210; Bergstein v. Stroock &
Stroock & Lavan LLP (2015) 236 Cal.App.4th 793, 806-807.)
Here, O’Connor and Halley vigorously dispute Phonexa’s
allegations that their actions were criminal. As to Phonexa’s
contention that they received stolen property (Pen. Code, § 496),
O’Connor and Halley correctly contend there is a factual dispute
as to whether the data was stolen because there is no evidence
they intended to permanently deprive Phonexa of this property.
(MMM Holdings, supra, 21 Cal.App.5th at 185 [holding that the
defendant attorney, who received documents taken from the
plaintiff company by a former employee, was not liable for
receiving stolen property because there was no “evidence that
16
[the former employee] intended to do anything with the
documents other than to use them in litigation”].)
O’Connor and Halley also dispute that they engaged in
criminal hacking under federal or state law. (18 U.S.C. § 1030;
Pen. Code, § 502.) As pertinent here, the CFAA criminalizes
accessing a computer without authorization or in excess of
authorization to obtain information (18 U.S.C. § 1030(a)(2)), to
fraudulently obtain anything of value (18 U.S.C. § 1030(a)(4)), or,
with varying mental states, to cause damage or loss (18
U.S.C. § 1030(a)(5)). The California analogue criminalizes
knowingly accessing and without permission using a computer in
specified ways (Pen. Code, § 502, subds. (c)(1)-(4)), “[k]nowingly
and without permission” providing access in violation of the
statute (Pen. Code, § 502, subd. (c)(6)), and “[k]nowingly and
without permission” accessing any computer (Pen. Code, § 502,
subd. (c)(7)).
For purposes of both the CFAA and the California statute,
a person who is permitted to access a computer system in the
course of their employment does not exceed authorization or
permission solely by violating conditions on that authorization or
permission. (Van Buren v. United States (2021) ___ U.S. ___, ___
[141 S.Ct. 1648, 1652-1653] [holding the CFAA’s “‘exceeds
authorized access’” clause applies “only to those who obtain
information to which their computer access does not extend, not
to those who misuse access that they otherwise have”] (Van
Buren); Chrisman v. City of Los Angeles (2007) 155 Cal.App.4th
29, 36 [construing Penal Code section 502, subdivision (h)’s
provision that subdivision (c) “does not apply to punish any acts
which are committed by a person within the scope of [their]
17
lawful employment” to include conduct that “violate[s] an
employer’s rules”] (Chrisman).)
Here, there is a factual dispute as to whether O’Connor was
authorized to access data on her Phonexa-issued computer after
Davtyan fired her on the phone on the morning of July 22, 2020.
Phonexa maintains Davtyan verbally revoked this access and
Cordova confirmed the revocation in writing shortly thereafter;
O’Connor denies Davtyan’s account of their call, says she did not
see Cordova’s email until after she and Halley cloned the hard
drive, and claims her employment did not terminate until the end
of the day. On this record, the Flatley rule does not apply with
respect to O’Connor. (Flatley, supra, 39 Cal.4th at 316 [“If . . . a
factual dispute exists about the legitimacy of the defendant’s
conduct, it cannot be resolved within the first step but must be
raised by the plaintiff in connection with the plaintiff’s burden to
show a probability of prevailing on the merits”].)
Unlike O’Connor, Halley was not arguably authorized or
permitted to access or use Phonexa’s computer as an employee.
We are not persuaded, however, as a matter of law, that
O’Connor was not entitled to extend her authorization to Halley,
and there is no evidence that Halley did anything O’Connor did
not ask him to do.9 Nothing in the text of either the California
statute or the CFAA indicates that authorization to access or use
a computer must come directly from the owner—at least to the
extent that the party delegating authority does not delegate more
9
It is true that Phonexa’s computer usage policy prohibits
“permitting someone to use another’s computer account,” but we
construe this as a condition on O’Connor’s authorized use—not a
limitation on the data or information to which that authorization
extended. (Van Buren, supra, ___ U.S. at ___ [141 S.Ct. at 1653].)
18
than they personally possess.10 The CFAA makes no reference to
the source of authorization, but the Ninth Circuit has
emphasized that a scenario in which “former employees whose
computer access was categorically revoked . . . surreptitiously
access[ ] data owned by their former employer” using another
employee’s credentials “bears little resemblance to asking a
spouse to log in to an email account to print a boarding pass.”
(United States v. Nosal (9th Cir. 2016) 844 F.3d 1024, 1038; see
also Wachter, Inc. v. Cabling Innovations, LLC (M.D. Tenn. 2019)
387 F.Supp.3d 830, 839, fn.4 [declining to address the theory that
“an entity that allegedly used the plaintiff’s employee as its agent
while the employee was still employed with the plaintiff . . . can
be liable under the CFAA[ ] even if its agent personally avoids
liability because he or she did not exceed his or her authorized
access” because it was “not develop[ed]” by the plaintiff, but
noting “the Court . . . searched and found no authority to support
this particular argument”].)
A contrary reading of these statutes would make a criminal
of every person who takes control of the mouse while helping
their partner apply a formula to a spreadsheet on a work-issued
computer. Courts have routinely and sensibly rejected
interpretations that “would attach criminal penalties to a
breathtaking amount of commonplace computer activity.” (Van
Buren, supra, ___ U.S. at ___ [141 S.Ct. at 1661]; Chrisman,
supra, 155 Cal.App.4th at 37 [rejecting the view “that an
10
Indeed, the California statute specifies that permission
must come from “the owner of the information” only with respect
to the installation of a “computer contaminant,” which is not
alleged in this case. (Pen. Code, § 502, subd. (b)(12).)
19
employer’s disapproval” places conduct outside the scope of
employment because “virtually any misstep, mistake, or
misconduct by an employee involving an employer’s computer
would . . . be criminal”].)
Because Phonexa’s claims against O’Connor and Halley
arise from protected activity and O’Connor and Halley’s conduct
was not criminal as a matter of law, we proceed to the second
prong of the anti-SLAPP analysis and consider whether
Phonexa’s claims have minimal merit.
C. Second Prong: Some, Not All, of Phonexa’s Claims
Have Minimal Merit
1. Computer Fraud and Abuse Act
As we have already discussed, the CFAA subjects to
criminal liability any person who intentionally accesses a
computer without authorization or exceeds authorized access and
performs certain actions. (18 U.S.C. § 1030(a).) To prevail on a
civil action under the CFAA, a plaintiff must prove the
defendant’s violation caused damages or losses of at least $5,000
over any one-year period. (18 U.S.C. §§ 1030(g),
1030(c)(4)(A)(i)(I), 1030(c)(2)(B)(iii).) Losses include, among other
things, “the cost of responding to an offense[ and] conducting a
damage assessment.” (18 U.S.C. § 1030(e)(11).)
The factual dispute that we found to preclude application of
the Flatley rule in the first stage of our analysis cuts in the
opposite direction and establishes the minimal merit of Phonexa’s
CFAA claim at this second stage of anti-SLAPP analysis.
Phonexa’s evidence that O’Connor and Halley were not permitted
to access data on the Phonexa-issued computer when they cloned
the hard drive, in combination with Garlie’s statement that
20
Phonexa paid over $9,000 to respond to the allegedly
unauthorized access, suffices to show a potential CFAA violation.
O’Connor and Halley contend, as an affirmative defense,
that their conduct is protected under the First Amendment. They
rely on case law analyzing the issue under the framework of the
Noerr11-Pennington12 doctrine, “a broad rule of statutory
construction[ ] under which laws are construed so as to avoid
burdening the constitutional right to petition.” (Tichinin, supra,
177 Cal.App.4th at 1064, citing Sosa v. DIRECTV, Inc. (9th Cir.
2006) 437 F.3d 923, 929-931.) The doctrine “immunizes conduct
encompassed by the petition clause—i.e., legitimate efforts to
influence a branch of government—from virtually all forms of
civil liability.” (Tichinin, supra, at 1065.) This includes “conduct
incidental to a petition or litigation,” i.e. “conduct normally and
reasonably necessary to an effective exercise of the right to
petition and not necessarily conduct incidental to actual
litigation.” (Id. at 1066.)
Here, though, disputed factual issues preclude a finding
that O’Connor and Halley’s conduct was protected as a matter of
law. Most significant, it is not clear whether the scope of the
material copied by O’Connor and Halley “went beyond what was
reasonably necessary to permit [O’Connor’s] attorneys to prepare
and prosecute” her action against Phonexa. (Fox Searchlight
Pictures, Inc. v. Paladino (2001) 89 Cal.App.4th 294, 315.)
Phonexa submitted evidence that at least some of the copied files
11
Eastern Railroad Presidents Conference v. Noerr Motor
Freight, Inc. (1961) 365 U.S. 127.
12
United Mine Workers of America v. Pennington (1965) 381
U.S. 657.
21
are unlikely to have any relationship to Phonexa’s COVID-19
policies. Without additional evidence addressing, for example,
the relative numbers of relevant and irrelevant files included on
the cloned hard drive, we cannot conclude as a matter of law that
O’Connor and Halley’s conduct is protected.
O’Connor and Halley’s various arguments that
indiscriminate copying of data was reasonably necessary to
prepare O’Connor’s lawsuit lack merit. The fact that they only
shared the documents with O’Connor’s attorneys does not render
the copying of Phonexa’s client list, for instance, reasonably
necessary to preparing a lawsuit on her behalf. Relatedly,
O’Connor’s claim that she could not possibly have identified the
documents relevant to her claims is undermined by her selective
forwarding of emails. The argument that cloning the hard drive
was warranted by the risk that Phonexa would not fulfill its
discovery obligations incorrectly assumes O’Connor would be left
with no remedy in that scenario. And even if authorities
condemning “self-help” discovery do not govern pre-litigation
investigation (see, e.g., Pillsbury, Madison & Sutro v. Schectman
(1997) 55 Cal.App.4th 1279, 1289), O’Connor and Halley’s
argument that “[c]opying a hard drive ensures that prospective
plaintiffs satisfy their preservation obligations” (italics added) is
misplaced with respect to data owned by and to be returned to
the prospective defendant.13
13
None of the cases O’Connor and Halley cite in relation to
this point present the scenario we confront in this case. Instead,
they deal with parties’ failure to preserve data on their personal
computers (Olney v. Job.com (E.D. Cal., Oct. 24, 2014, No. 1:12-
cv-01724-LJO-SKO), 2014 WL 5430350), the affirmative deletion
of data from employer-issued computers (Leon v. IDX Systems
Corp. (9th Cir. 2006) 464 F.3d 951, 956; Postle v. SilkRoad
22
Although the law is unsettled as to which party bears the
burden of proof regarding affirmative defenses in the anti-SLAPP
context, “we need not resolve the dispute here. What is
important is that, regardless of the burden of proof, the court
must determine whether [a] plaintiff can establish a prima facie
case of prevailing, or whether [a] defendant has defeated [the]
plaintiff’s evidence as a matter of law.” (Dickinson v. Cosby
(2017) 17 Cal.App.5th 655, 683 (Dickinson).) Because there is
evidence that O’Connor and Halley copied data beyond what was
reasonably necessary to prepare O’Connor’s lawsuit, their First
Amendment defense does not defeat Phonexa’s CFAA claim—or
any of its other claims—as a matter of law.
2. Misappropriation of trade secrets
CUTSA, California’s trade secrets law, “has been
characterized as having a ‘comprehensive structure and
breadth . . . .’ [Citation.]”14 (K.C. Multimedia, Inc. v. Bank of
Technology, Inc. (D. N.H., Feb. 19, 2019, No. 18-cv-224-JL) 2019
WL 692944; ActionLink, LLC v. Sorgenfrei (N.D. Oh., Jan. 27,
2010, No. 5:08CV2565), 2010 WL 395243, *5), and the failure to
preserve evidence owned by third parties (Silvestri v. General
Motors Corp. (4th Cir. 2001) 271 F.3d 583, 591; Cognate
BioServices, Inc. v. Smith (D. Md., Aug. 31, 2005, No. WDQ-13-
1797), 2015 WL 5158732, *3-*4).
14
“Trade secret misappropriation occurs [under CUTSA]
whenever a person: (1) acquires another’s trade secret with
knowledge or reason to know ‘that the trade secret was acquired
by improper means’ ([Civ. Code, ]§ 3426.1, subd. (b)(1)); (2)
discloses or uses, without consent, another’s trade secret that the
person ‘[u]sed improper means to acquire knowledge of’ (id., subd.
(b)(2)(A)); (3) discloses or uses, without consent, another’s trade
23
America Technology & Operations, Inc. (2009) 171 Cal.App.4th
939, 954 (K.C. Multimedia).) “That breadth suggests a legislative
intent to preempt the common law. [Citations.] At least as to
common law trade secret misappropriation claims, ‘[C]UTSA
occupies the field in California.’ [Citation.]” (Ibid.)
Civil Code section 3426.7 describes CUTSA’s impact on
other claims. As pertinent here, CUTSA generally “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, subd. (b).) Civil Code
section 3426.7 “thus ‘expressly allows contractual and criminal
remedies, whether or not based on trade secret misappropriation.’
[Citation.] ‘At the same time, [it] implicitly preempts alternative
civil remedies based on trade secret misappropriation.’
[Citation.]” (K.C. Multimedia, supra, 171 Cal.App.4th at 954.)
secret that the person, ‘[a]t the time of disclosure or use, knew or
had reason to know that his or her knowledge of the trade secret
was’ (a) ‘[d]erived from or through a person who had utilized
improper means to acquire it’ (id., subd. (b)(2)(B)(i)), (b)
‘[a]cquired under circumstances giving rise to a duty to maintain
its secrecy or limit its use’ (id., subd. (b)(2)(B)(ii)), or (c) ‘[d]erived
from or through a person who owed a duty to the person seeking
relief to maintain its secrecy or limit its use’ (id., subd.
(b)(2)(B)(iii)); or (4) discloses or uses, without consent, another's
trade secret when the person, ‘[b]efore a material change of his or
her position, knew or had reason to know that it was a trade
secret and that knowledge of it had been acquired by accident or
mistake’ (id., subd. (b)(2)(C)).” (DVD Copy Control Assn., Inc. v.
Bunner (2003) 31 Cal.4th 864, 874.)
24
“As reflected in case law decided under [CUTSA], the
determination of whether a claim is based on trade secret
misappropriation is largely factual. [Citations.]” (Ibid.)
Phonexa does not dispute that its common law trade
secrets claim is superseded by CUTSA. Instead, relying on the
principle that a complaint is sufficient so long as it states a cause
of action under any possible legal theory (Prakashpalan v.
Engstrom, Lipscomb & Lack (2014) 223 Cal.App.4th 1105, 1120),
Phonexa contends it demonstrated a probability of success under
CUTSA. But Phonexa has failed to reckon with O’Connor and
Halley’s contention that federal law immunizes them from
liability under CUTSA.
The Defense of Trade Secrets Act provides, in pertinent
part, that “[a]n individual shall not be held criminally or civilly
liable under any Federal or State trade secret law for the
disclosure of a trade secret that— [¶] (A) is made— [¶] (i) in
confidence . . . to an attorney; and [¶] (ii) solely for the purpose of
reporting or investigating a suspected violation of law . . . .” (18
U.S.C. § 1833(b)(1)(A).) “[T]he plain language of [18
U.S.C. § 1833(b)(1)] explicitly provides immunity from liability
under state trade secret laws.” (Gatti v. Granger Medical Clinic,
P.C. (D. Ut. 2021) 529 F.Supp.3d 1242, 1266; accord, FirstEnergy
Corp. v. Pircio (N.D. Oh. 2021) 524 F.Supp.3d 732, 738
[dismissing claims under federal and state trade secrets statutes
based on immunity conferred by 18 U.S.C. § 1833(b)].)
Here, Phonexa alleged O’Connor and Halley provided
Phonexa data not only to O’Connor’s attorney, but also to Rosario
at Phonexa’s competitor, Informa. Phonexa failed, however, to
provide any substantiation for this claim in its opposition to
O’Connor and Halley’s special motion to strike. O’Connor and
25
Halley, by contrast, stated they did not share any of Phonexa’s
trade secrets with Rosario or Informa. Excerpts of the
communications between O’Connor and Rosario filed by O’Connor
indicate that she communicated with Rosario—a human
resources professional—solely to solicit advice regarding her
anticipated termination and lawsuit.15 Nothing in the record
indicates O’Connor or Halley shared trade secrets as defined in
either the state or federal trade secrets statutes with anyone
other than O’Connor’s attorney.16 (Civ. Code, § 3426.1, subd. (d);
18 U.S.C. § 1839(3).) On this record, O’Connor and Halley have
accordingly defeated Phonexa’s CUTSA claim as a matter of law.
(Dickinson, supra, 17 Cal.App.5th at 683.)
3. Receipt of stolen property
Phonexa does not dispute that civil claims for receipt of
stolen property are subject to supersession by CUTSA. (ATS
15
Phonexa emphasizes Rosario directed O’Connor to take
“everything” and suggests this indicates a purpose beyond
litigation. Phonexa relies, however, on a string of messages that
is expressly addressed to O’Connor’s employment claims. Rosario
advised O’Connor not to send an email to Gasparyan “until
[O’Connor was] certain [she had] sent [her]self copies of emails
[she] . . . sent to [her] team re: working remotely,” “[e]mails from
the shitty lawyer with the voluntary in office forms and no mask
bullshit from before,” and, more generally, “[e]verything.”
Rosario subsequently referred O’Connor to an attorney,
suggested she “definitely ha[d] a good case on multiple points,”
and commented on the attorney’s advice.
16
Phonexa does not allege O’Connor violated CUTSA by
providing its trade secrets to Halley.
26
Products, Inc. v. Champion Fiberglass, Inc. (N.D. Cal., Jan. 15,
2015, No. 13-cv-02403-SI), 2015 WL 224815, *2; New Show
Studios LLC v. Needle (C.D. Cal., June 30, 2014, No. 2:14-cv-
01250-CAS(MRWx)), 2014 WL 2988271, *9-*10.) Instead,
Phonexa contends its claim for receipt of stolen property has a
basis independent of misappropriation of trade secrets.
Phonexa makes no effort to distinguish the factual bases
for its trade secrets and stolen property claims, however.
Phonexa’s fourth cause of action for misappropriation of trade
secrets alleges “O’Connor and Halley . . . acquired substantial
trade secrets by their unauthorized copying of Phonexa’s data
from O’Connor’s work computer onto external hard drives and by
the forwarding of emails to O’Connor’s personal email and by the
downloading of data from the Phonexa Skype account assigned to
O’Connor for work by Phonexa.” Phonexa’s sixth cause of action
for receipt of stolen property alleges O’Connor and Halley stole
Phonexa’s “trade secrets and other valuable and confidential data
and methods.” Because the complaint sweeps all of the allegedly
stolen data into the category of trade secrets—and does not allege
any other basis for its property interest in these data—there is no
substance to the nominal distinction between “trade secrets” and
“other valuable confidential data and methods” in the stolen
property claim. (Civ. Code, § 3426.1, subd. (d) [defining “trade
secret,” in pertinent part, to “mean[ ] information, including
a . . . method . . . that: [¶] (1) [d]erives independent economic
value . . . from not being generally known to the public or to other
persons who can obtain economic value from its disclosure or use;
and [¶] (2) [i]s the subject of efforts that are reasonable under the
circumstances to maintain its secrecy”]; see also Silvaco Data
Systems v. Intel Corp. (2010) 184 Cal.App.4th 210, 239, fn. 22
27
[“emphatically reject[ing]” the proposition that CUTSA was not
intended to supersede claims “‘based on the taking of information
that, though not a trade secret, was nonetheless of value to the
claimant’”] (Silvaco), disapproved on other grounds in Kwikset
Corp. v. Superior Court (2011) 51 Cal. 4th 310.) Because these
claims are based on “the same nucleus of facts,” the stolen
property claim is superseded by CUTSA. (K.C. Multimedia,
supra, 171 Cal.App.4th at 962.)
4. Breach of fiduciary duty
Phonexa does not dispute that claims for breach of
fiduciary duty are subject to supersession by CUTSA. (See, e.g.,
Anokiwave, Inc. v. Rebeiz (S.D. Cal., Sept. 17, 2018, No. 18-cv-629
JLS (MDD)), 2018 WL 4407591, *3-*4; Mattell, Inc. v. MGA
Entertainment, Inc. (C.D. Cal., Mar. 28, 2011, No. CV 04–9049
DOC (RNBx)), 2011 WL 8427611, *3.) Phonexa contends,
however, that its claim for breach of fiduciary duty is not based
on the same facts as its trade secrets claim. Phonexa argues, for
instance, that O’Connor breached her fiduciary duty by “fail[ing]
to disclose that she was spending company time seeking to figure
out how to unlawfully export (steal) Phonexa’s data.” This
characterization of Phonexa’s fiduciary duty claim is at odds with
the complaint, which alleges “O’Connor breached all of these
fiduciary duties to [Phonexa] when she . . . copied and stole
Phonexa’s data, refused to return that data to Phonexa, secreted
her unlawful activity from Phonexa, and continue[d] to
deliberately attempt to deceive Phonexa. The taking of
Phonexa’s data and property, in and of itself, constitutes a breach
of O’Connor’s fiduciary duties to [Phonexa].” Because this claim,
28
as pled, is based on the taking of protected data, it too is
superseded by CUTSA.
5. Conversion
Phonexa does not dispute that conversion claims are
subject to supersession by CUTSA. (See, e.g., SunPower Corp. v.
SolarCity Corp. (N.D. Cal., Dec. 11, 2012, No. 12-CV-00694-
LHK), 2012 WL 6160472, *4-*9.) Its conclusory argument that
“this claim is not premised upon the data stolen being a trade
secret” is contradicted by the complaint, which alleges O’Connor
and Halley “misappropriated [Phonexa’s] trade secrets and
converted [Phonexa’s] property.” Although the complaint further
alleges, “[i]n the alternative, to the extent, if any, any of the
misappropriated material is not trade secret, [Phonexa] is
informed and believes . . . [O’Connor and Halley] are using
[Phonexa’s] valuable confidential and proprietary data,
information and methods for their own benefit,” Phonexa offers
no argument that “any property interest [it] may have in its non-
trade secret proprietary information is qualitatively . . . different
from the grounds upon which its trade secrets are considered
property.” (Id. at *10.) The conversion claim is therefore
superseded as well.
6. Penal Code section 502 (California’s CFAA
analogue)
As O’Connor and Halley concede in their reply brief, they
“[do not] attack the elements” of Phonexa’s claim under Penal
Code section 502. They contend, however, that this claim is
superseded by CUTSA. No published California case has
addressed whether CUTSA supersedes a claim brought under
29
this statute, and federal courts are divided on the issue.
(Compare Henry Schein, Inc. v. Cook (N.D. Cal., Mar. 1, 2017, No.
16-cv-03166-JST), 2017 WL 783617, *5 [“Because [the plaintiff’s]
section 502 claim cannot survive after the trade secrets facts are
removed, the Court agrees that the claim is preempted”], Western
Air Charter, Inc. v. Schembari (C.D. Cal., Oct. 6, 2017, No. CV 17-
00420-AB (KSx)), 2017 WL 10638759, *6 [same], and C&H Travel
& Tours, Inc. v. Chow (C.D. Cal., Sept. 26, 2018, No. 2:18-cv-
06690-RGK-MRW), 2018 WL 6427369, *2 [same], with Heieck v.
Federal Signal Corp. (C.D. Cal., Nov. 4, 2019, No. SACV 18-
02118 AG (KESx)), 2019 WL 6873869, *4 [holding that because
CUTSA is a “criminal statute,” it falls within CUTSA’s provision
that it does not supersede “criminal remedies”].) We need not
decide the issue, however, because Phonexa’s claim does not
depend on misappropriation of trade secrets.
Phonexa alleges violations of Penal Code section 502,
subdivision (c)(1)(B), addressing unpermitted use to “wrongfully
control or obtain money, property, or data”; (c)(2), addressing the
unpermitted taking, use, or copying of data; (c)(3), addressing
unpermitted use of computer services; (c)(4), addressing the
unpermitted “add[ition], alter[ation], damage[ to], delet[ion], or
destr[uction of] any data, computer software, or computer
programs”; (c)(6), addressing the unpermitted “provi[sion] or
assist[ance] providing a means of accessing a computer”; and
(c)(7), addressing unpermitted access to a computer. None of
these subdivisions requires that the relevant data or access
involve trade secrets or other proprietary information. (TMX
Funding, Inc. v. Impero Technologies, Inc. (N.D. Cal., June 17,
2010, No. C 10-00202 JF (PVT)), 2010 WL 2509979, *7; see also
Pen. Code, § 502, subd. (a) [“The Legislature . . . finds and
30
declares that protection of the integrity of all types and forms of
lawfully created . . . computer data is vital to the protection of the
privacy of individuals as well as to the well-being of financial
institutions, business concerns, governmental agencies, and
others . . .”], italics added.) Accordingly, regardless of whether
CUTSA might supersede claims under Penal Code section 502 in
other circumstances, it does not do so here. There is accordingly
nothing undermining Phonexa’s showing that its Penal Code
section 502 claim has minimal merit.
7. Unfair Competition Law
To prevail on an unfair competition law claim, a plaintiff
must prove the defendant engaged in an “unlawful, unfair or
fraudulent business act or practice.” (Bus. & Prof.
Code, § 17200.) As predicates for this claim, Phonexa alleges
violation of CUTSA, the CFAA, and CFAA’s California analogue.
Although an unfair competition law claim may be superseded by
CUTSA if it “sound[s] in misappropriation of trade secrets and
state[s] no basis for relief outside of CUTSA” (Silvaco, supra, 184
Cal.App.4th at 241), the computer-related claims do not depend
on misappropriation of trade secrets. Because Phonexa’s claims
under the CFAA and its California analogue have minimal merit,
its claim under the unfair competition law does as well.
8. Breach of contract
Phonexa’s complaint alleges O’Connor breached two
similarly-named contracts: a “Nondisclosure and Confidentiality
Agreement” and an “Employee Confidentiality, Nondisclosure
and Nonrecruiting Agreement.” With respect to the first of these
agreements, the complaint alleges O’Connor breached a provision
31
under which she was bound “not to copy[ or]
reproduce . . . any . . . Confidential Information without the prior
written consent of Phonexa” and “not to remove, copy, or transfer
Confidential Information from Phonexa computers and/or servers
without prior express permission from Phonexa.” With respect to
the second agreement, the complaint alleges O’Connor breached
provisions under which she was bound not to “use, publish or
disclose [Phonexa’s] Trade Secrets or Confidential Information.”
The complaint also alleges O’Connor breached the second
agreement’s provisions requiring that she, among other things,
deliver to Phonexa “all records, files, electronic data,
documents, . . . and the like in [her] possession . . . that pertain in
any way to the business of [Phonexa] and that [she] prepared,
used, or came in contact with while employed by [Phonexa].”
O’Connor does not dispute the existence of these
agreements, Phonexa’s performance, her alleged breach, or
damages.17 (Oasis West Realty, LLC v. Goldman (2011) 51
Cal.4th 811, 821 [listing elements of claim for breach of
contract].) Rather, she contends these provisions amount to
unenforceable agreements not to compete because the
agreements define “confidential information” to include
information other than trade secrets. (Bus. & Prof. Code, § 16600
[subject to specific exceptions, “every contract by which anyone is
restrained from engaging in a lawful profession, trade, or
business of any kind is to that extent void”].) O’Connor cites
17
One caveat: O’Connor contends her alleged breach of an
agreement to notify Phonexa of data she retained at termination
did not result in damages. This issue ultimately does not impact
our analysis.
32
several cases involving employment agreements with sweeping
confidentiality provisions that effectively prevented employees
from continuing to work in their chosen fields. (See, e.g., Brown
v. TSG Management Co., LLC (2020) 57 Cal.App.5th 303, 316-
317, 319 [contract term requiring employee to “keep all
Confidential Information in strictest confidence and trust,” where
“confidential information” was defined to include information
usable in “all aspects of working in the securities industry at
large,” void because it would “plainly bar [the employee] in
perpetuity from doing any work in the securities field”] (Brown);
Dowell v. Biosense Webster, Inc. (2009) 179 Cal.App.4th 564, 577-
578 [agreement prohibiting salespeople from using confidential
information, defined to include “the names of customers,
customer preferences, needs, requirements, purchasing histories
or other customer-specific information,” was “so broadly worded
as to restrain competition”] (Dowell).)
Assuming without deciding the contract provisions similar
to those discussed in Brown and Dowell (e.g., prohibitions against
use and disclosure of broadly-defined confidential information)
are void, these are not the sole basis of Phonexa’s claim for
breach of contract. O’Connor’s alleged breach of her agreement to
return company data in her possession upon termination is not
comparable to terms broadly restricting the use of information
essential to all work within a particular field. Whatever the
merits of O’Connor’s affirmative defense as to specific theories
supporting Phonexa’s contract claim, Phonexa’s claim has
minimal merit under at least one such theory.
33
DISPOSITION
The order denying O’Connor and Halley’s special motion to
strike is vacated and the matter is remanded with directions to
grant the motion as to Phonexa’s claims for misappropriation of
trade secrets, receipt of stolen property, breach of fiduciary duty,
and conversion, and to deny the motion in all other respects.
O’Connor and Halley are awarded costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
BAKER, J.
We concur:
RUBIN, P. J.
MOOR, J.
34