DocketNumber: Case No. 3:16-cv-05399-WHO
Citation Numbers: 360 F. Supp. 3d 994
Judges: Orrick
Filed Date: 12/28/2018
Status: Precedential
Modified Date: 7/25/2022
INTRODUCTION
Plaintiff Prostar Wireless Group, LLC ("Prostar") seeks to hold Domino's Pizza
BACKGROUND
I. FACTUAL BACKGROUND
A. Prostar's Early Work on Driver Tracking
Prostar is a wireless services group that provides standard communication options as well as custom designed software and dynamic product development. First Amended Complaint ("FAC") [Dkt. No. 29] ¶¶ 11-13. Domino's is a pizza company with approximately 6,000 domestic and 8,000 to 9,000 international stores. Deposition of Dennis Maloney ("Maloney Depo.") [Dkt. No. 72-9] 75:20-76:12. The corporation owns about 400 domestic stores; the rest are franchises. Id. 107:3-13.
By 2007, Prostar was working to develop a driver tracking Solution to allow pizza companies to better manage delivery. Declaration of Joe Olsen ("Olsen Decl.") [Dkt. No. 77-57] ¶ 2. The Solution was not customer-facing but rather aimed at improving the efficiency of store operations. Pierson Decl. Ex. 16 [Dkt. No. 72-16], 5
B. Collaboration Between Prostar, Domino's, and IBM
In December 2010, Prostar, Domino's, and IBM
Joe Olsen, who at various points has been a Prostar software developer, chief technology officer, consultant, and shareholder, continued to work toward a GPS Solution with Bohlen, Domino's executives, and Domino's IT personnel. See Olsen Decl. ¶¶ 3-5; Olsen Depo. 38:10-14, 41:16-19; Nash Decl. Ex. 42 [Dkt. No. 76-35] (emails between Bohlen and Chris Demery, also of Domino's, about the Prostar Solution pilot). Olsen also worked with IBM personnel, and he "understood ... that IBM had a close relationship with all Domino's franchisees as well as Domino's largest and most influential franchisees." Olsen Decl. ¶¶ 4-5. Olsen explained the plan moving forward as follows:
So the terms were that we, [Domino's] and Prostar, develop and integrate a full Solution with parameters ... that would be integrated into Pulse, that IBM would do the sales and the marketing of the product to franchises, and that once that was completed ... we, being IBM, Prostar and Domino's, would sell driver tracking to individual franchises all across the -- across the spectrum of Domino's franchises.
Olsen Depo. 108:23-109:12; see id. 872:18-873:14 (testifying IBM would be responsible for selling Prostar's Solution).
*1004By March 2011, Prostar had become one of IBM's approved vendors. Olsen Decl. ¶ 6. On March 11, 2011, Prostar and IBM entered into a Software and Services Engagement Agreement. Nash Decl. Ex. 4 [Dkt. No. 77-5] (agreement). Prostar did not enter into a contract with Domino's because "all the agreements were through IBM." Olsen Depo. 143:8-12. During this time, Olsen and other individuals from Prostar were in regular contact with IBM and with Domino's executives and IT personnel. Olsen Decl. ¶ 7.
C. Development, Testing, and Equivocation
Between 2011 and 2013, Prostar "devoted thousands of hours to custom software development work and related activities." Id. ¶ 8. Olsen did this work under the belief that "if [Prostar and IBM's] joint effort proved fruitful in developing and integrating the Prostar solution into the Pulse system, the solution would be made available to Domino's franchisees" for a monthly fee. Id.
In May 2012, a Domino's employee indicated to Olsen that it was "fully committed" to the Solution.
In September 2012, Domino's let Prostar and IBM know it could not make a commitment to the Solution.
During one system-wide Pulse update in May 2013, Domino's released the product functionality as a pilot. Bohlen Depo. 84:6-85:10. At that point, Domino's could flip a switch and the APIs would be enabled for a store to use the Solution. Id. 83:19-84:5.
Over time, Prostar tested various versions of the Solution at Domino's franchisee locations. Id. ¶ 9. In all, it tested the Solution at approximately 15 locations. Pierson Decl. Ex. 35 (Prostar Response to Interrogatory No. 18) [Dkt. No. 72-35]. Some franchisees were unwilling to pay for the pilot and were permitted to test it for free. Pierson Decl. Ex. 34 (email from Olsen to Matthew Walls of Domino's) [Dkt. No. 72-34].
In July 2013, IBM proposed a Project Change Request ("PCR") to Domino's. Pierson Decl. Ex. 26 (emails from Maertens of IBM to Walls of Domino's) [Dkt. No. 72-26]. Domino's refused to sign the PCR. Pierson Decl. Ex. 27 (email from Walls to Maertens) [Dkt. No. 72-27]. Domino's wrote that they had previously discussed an agreement between the franchisees and IBM/Prostar, and Domino's "completely disagree[d]" with the idea of taking ownership over the Solution by signing a contract. Id.
D. Domino's Refuses to Allow Prostar and IBM to Sell the Solution to Franchisees
In February 2014, Olsen attended a meeting at Domino's headquarters in Ann Arbor, Michigan. Olsen Decl. ¶ 21. He learned that Domino's wanted to make changes to the Solution, including making it customer-facing and available for use on Android phones and iPhones. Id. ¶ 22. Olsen *1005began to implement that work and provided Domino's weekly updates. Id.
In October 2014, Olsen reached out to Domino's because the Sprint device that Prostar had used to develop the Solution was no longer being manufactured. Pierson Decl. Ex. 36 (email from Olsen to Michael Davis of Domino's). Domino's responded that until it finished reviewing the technology, the Solution would "be in a holding pattern from a [Domino's] perspective." Id.
The Solution was ready for use on smart phones by May 2015. Olsen Decl. ¶ 22. At that same time, Domino's learned that Pizza Hut was developing a customer-facing GPS system. Pierson Decl. Ex. 42 (internal Domino's presentation on Pizza Hut's announcement that it would create a GPS delivery tracker). In July 2015, a Domino's employee visited a store that was testing Prostar's Solution, spoke with Olsen, and then invited him to Ann Arbor. Deposition of Dennis Maloney ("Maloney Depo.") 289:11-290:17, 283:16-18, 297:22-298:2. Prior to that meeting, the parties entered into a nondisclosure agreement ("NDA") that stated they were discussing "a possible business relationship." Pierson Decl. Ex. 44 (NDA).
At a July 30, 2015 meeting in Ann Abor, Olsen learned that Domino's was working to develop its own driver tracking system. Id. ¶ 26. Domino's nonetheless asked Prostar to create a rollout plan for the Solution, which it did. Id. On August 31, 2015, Domino's told Prostar that it would not be using Prostar's Solution. Id.
II. PROCEDURAL HISTORY
Prostar filed its initial complaint in San Mateo Superior Court on August 8, 2016, and Domino's removed it to this court on September 21, 2016. Dkt. Nos. 1, 1-1.
On January 6, 2017, I granted Domino's motion to dismiss the complaint because Prostar had not adequately alleged the elements of the causes of action it asserted. Order Granting Motion to Dismiss ("Order") [Dkt. No. 25]. The breach of fiduciary duty claim failed because Prostar did not adequately plead sharing of profits and losses as required to show a joint venture. Id. 7. "While I [could] reasonably infer that potential profits from increased efficiency and customer satisfaction may be derivative of the Solution, this [was] not synonymous with an agreement to share joint profits." Id. The implied-in-fact contract claim failed because there were no plausible allegations showing Domino's intent to promise to sell the fully developed Solution. Id. 8. The breach of covenant of good faith and fair dealing claim failed because there were no remaining contract claims. Id. 9. The tortious interference with prospective economic advantage claims failed because the allegations were "insufficient to rise to the level of an 'existing relationship' " with the franchisees. Id. 10. The unfair competition claim failed because it was based on a common law claim, which was insufficient to show unlawfulness under the UCL. Id. 10-11. Finally, the misappropriation of trade secrets claim failed because Prostar failed to adequately allege that it took reasonable efforts to maintain the secrecy of the trade secrets it asserted. Id. 12.
I granted Prostar leave to amend, and it filed an amended complaint on January 26, 2017. First Amended Complaint ("FAC") [Dkt. No. 29]. The amended complaint alleges ten causes of action against Domino's: (1) breach of fiduciary duty, FAC ¶¶ 73-90; (2) intentional interference with prospective economic relations, id. ¶¶ 105-17; (3) negligent interference with prospective economic relations, id. ¶¶ 118-25; (4) misappropriation of trade secrets ( Civil Code § 3426 et seq. ) id. ¶¶ 98-105; (5) breach of implied in fact contract, id. ¶¶ 126-46; (6) breach of the covenant of good faith and fair dealing, id. ¶¶ 147-53;
*1006(7) deceit, id. ¶¶ 154-69; (8) negligent misrepresentation, id. ¶¶ 170-82; (9) promissory estoppel, id. ¶¶ 183-87; and (10) unfair competition under California Business and Professions Code § 17200, et. seq. , id. ¶¶ 188-93.
Domino's answered the amended complaint on February 23, 2017. Dkt. No. 32. The parties proceeded to discovery, and Domino's filed the pending motion for summary judgment on October 29, 2018. Motion for Summary Judgment ("MSJ") [Dkt. No. 71]. I heard argument on the motion on December 19, 2018.
LEGAL STANDARD
Summary judgment on a claim or defense is appropriate "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." FED. R. CIV. P. 56(a). In order to prevail, a party moving for summary judgment must show the absence of a genuine issue of material fact with respect to an essential element of the non-moving party's claim, or to a defense on which the non-moving party will bear the burden of persuasion at trial. See Celotex Corp. v. Catrett ,
On summary judgment, the court draws all reasonable factual inferences in favor of the non-movant.
DISCUSSION
I. WHETHER PROSTAR'S NON-CONTRACT CLAIMS ARE PREEMPTED
Domino's argues that it is entitled to summary judgment on claims one (breach of fiduciary duty), two (intentional interference with prospective economic relations), three (negligent interference with prospective economic relations), seven (intentional misrepresentation), eight (negligent misrepresentation), nine (promissory estoppel), and ten (unfair competition) because they are preempted by CUTSA. MSJ 8. With the exception of contractual claims, CUTSA "preempts common law claims that are based on the same nucleus of facts as the misappropriation of trade secrets claim for relief." Peralta v. California Franchise Tax Bd. ,
Domino's argues that "[a]s alleged, core to each claim is that Domino's used Prostar's driver tracking technology, supplanting Prostar's chance to sell to franchisees." MSJ 8. Prostar counters that its common law claims survive because they are based on a different nucleus of facts. Opposition ("Oppo.") [Dkt. No. 76-4] 27. I conclude that only Prostar's claim for breach of *1007fiduciary duty rests on a materially distinct set of facts; the remaining claims are preempted.
A. Fiduciary Duty
Domino's argues that Prostar's breach of fiduciary duty claim relies on the same facts as its claims under CUTSA. Reply 18. Domino's relies on a case in which the court decided to strike the complaint's partnership allegations, which the plaintiff had newly alleged in an amended complaint after the court dismissed the first set of allegations as preempted. GeoData Sys. Mgmt., Inc. v. Am. Pac. Plastic Fabricators, Inc. , No. CV1504125VAPJEMX,
B. Deceit and Negligent Misrepresentation
Prostar argues that these claims are not preempted because "Domino's committed fraud to gain Prostar's labor and insight for free" whether or not Domino's also misappropriated its trade secrets. Oppo. 28. In one case, a court in this district found that a fraud claim was preempted in spite of plaintiffs' allegations that the defendants had fraudulently induced their resources and time rather than their intellectual property. Farhang v. Indian Inst. of Tech., Kharagpur , No. C-08-02658 RMW,
C. Tortious Interference with Prospective Economic Relations and Unfair Competition
Prostar's tortious interference and unfair competition claims depend on its fraud claims. See FAC ¶¶ 101, 114, 189. Because its fraud claims are preempted, summary judgment is also appropriate on these claims.
D. Promissory Estoppel
Domino's asserts that Prostar's promissory estoppel claim rests on its contention that Domino's "made a promise in service of stealing Prostar's technology." Reply 18. Prostar did not oppose Domino's motion for summary judgment on preemption grounds. Accordingly, I will grant it.
Domino's motion for summary judgment on the deceit and negligent misrepresentation claims is GRANTED because those claims are preempted. Its motion is GRANTED with respect to the tortious interference and unfair competition claims because those claims depend on their fraud allegations. Domino's motion for summary judgment on the promissory estoppel claim is GRANTED because Prostar failed to oppose the motion. Domino's motion for summary judgment of the fiduciary duty claims on the basis of preemption is DENIED.
*1008II. WHETHER DOMINO'S IS ENTITLED TO SUMMARY JUDGMENT
Domino's argues that notwithstanding preemption, it is entitled to summary judgment on the merits of all ten causes of action. Although I have already concluded that five of Prostar's claims are preempted, I will nonetheless address the entirety of Domino's motion on the merits. I conclude that summary judgment is appropriate because Prostar has failed to raise triable issues.
A. Fiduciary Duty
"The elements of a cause of action for breach of fiduciary duty are: (1) existence of a fiduciary duty; (2) breach of the fiduciary duty; and (3) damage proximately caused by the breach." Stanley v. Richmond ,
"The essential element of a joint venture is an undertaking by two or more persons to carry out a single business enterprise jointly for profit." Pellegrini v. Weiss ,
There is no evidence that Prostar and Domino's expressly agreed (either orally or in writing) to begin a joint venture. Instead, Prostar argues that the parties' conduct supports a conclusion that there was a joint venture because "the parties here worked in concert for years" to develop the GPS Solution, and both contributed to its costs and had a stake in its success. Oppo. 18. Domino's argues that there is no evidence to support a finding that the parties (1) agreed to share profits, and (2) had a right to joint control. MSJ 9-10.
Prostar has failed to present sufficient evidence to create a triable issue that Domino's owed it a fiduciary duty because a reasonable fact finder could not conclude that the parties came to an agreement to share profits or that they exercised joint control.
1. Profit Sharing
Domino's argues that there is no evidence that the parties agreed to share profits. At most, Prostar contemplated paying Domino's a flat fee for providing product support for the Solution through Pulse-Care, its preexisting support system. MSJ 21-22. Prostar counters that the parties collaborated to develop a single service, and neither would be successful unless the Solution was successful. Oppo. 17-18. The parties "understood that profits and losses would be shared," and more specificity is not required. Oppo. 17.
Joint venturers must agree to share in the actual profits and losses of their venture. Connor v. Great W. Sav. & Loan Ass'n ,
In Connor , the California Supreme Court held that a joint venture did not exist because although the parties cooperated, shared control, and anticipated profits, "neither was to share in the profits or the losses that the other might realize or suffer." Connor v. Great W. Sav. & Loan Ass'n ,
A court in this district granted summary judgment where there was insufficient evidence of a joint venture between parties who instead reached an "agreement to agree." Goodworth Holdings ,
There is insufficient evidence of profit sharing to create a triable issue. Although joint venturers need not iron out all the details of their venture, here the parties failed to agree on essential elements, like the structure of their potential financial relationship, even after years of discussions and collaboration. See Goodworth ,
*10102. Joint Control
Domino's argues that a fact finder could not conclude there was a joint venture because "[t]here is no evidence that Domino's and Prostar had the right to control each other's businesses, operations, or employees with respect to driver tracking." MSJ 10. In addition, five years after the joint venture was supposedly formed, Prostar signed a contract saying the parties were independent contractors who had no authority to bind one another.
"An essential element of a joint venture is the right of joint participation in the management and control of the business." Gradus v. Hanson Aviation, Inc. ,
In one case, a California court of appeal concluded that a joint venture did not exist because only one party had control over the production of the product. Orosco v. Sun-Diamond Corp. ,
A reasonable fact finder could not conclude that the parties exercised joint control over the Solution. Prostar had control over the Solution, and as the intended customer, Domino's requested desired features, approved changes, and generally communicated with Prostar frequently. But none of that shows that Domino's exercised control over the Solution or had any ability to hold Prostar to actually implementing those changes. At the extreme, if Prostar had decided to completely scrap its development efforts, it would not have had to answer to Domino's. See Orosco ,
Prostar and Domino's both expressed an interest in the Solution and believed they stood to benefit from its success. They engaged in frequent conversations and collaborated to that end. But without evidence of joint control or an agreement to share profits, this conduct does not transform their efforts into a joint venture. Domino's motion for summary judgment on the breach of fiduciary duty claim is GRANTED.
B. Implied In Fact Contract
The elements for a breach of an implied in fact contract are: "(1) the existence of the contract; (2) performance by the plaintiff or excuse for nonperformance; (3) breach by the defendant; and (4) damages." Rubio v. U.S. Bank N.A. , No. C 13-05752 LB,
*1011Prostar argues that the evidence of the parties' conduct shows that as of June 13, 2012, there was an implied agreement that if Prostar developed the Solution to Domino's satisfaction, Domino's would purchase it. Oppo. 10; see FAC ¶ 133. Domino's challenges the sufficiency of Prostar's evidence of such an agreement on three grounds: the later-executed NDA precludes a finding of an implied agreement, there is no evidence of Domino's intent to agree, and any promise Domino's purportedly made is too vague to be enforceable. I will grant Domino's motion for summary judgment because the NDA, which is unambiguous and which embraces the same subject matter, precludes the implied agreement that Prostar asserts. Even if the NDA did not preclude such a finding, there is insufficient evidence of intent, and any agreement is too vague to be enforceable.
1. The Unambiguous NDA Precludes an Implied Agreement
Domino's argues that the 2015 NDA between the parties precludes a finding that there was an implied-in-fact contract. MSJ 11. In opposition, Prostar does not dispute that the NDA covers the same subject matter as the supposed implied-in-fact contract-namely, the relationship between the parties
"A valid express agreement precludes a contradictory implied contract embracing the same subject matter." Baker v. Kaiser Aluminum & Chem. Corp. ,
The parties' NDA precludes a finding that Domino's had impliedly agreed to purchase the Solution from Prostar upon its satisfactory development. The NDA describes itself as existing "[i]n connection with business discussions and a possible business relationship relating to the purchase of products or services ('Product') by Domino's from Vendor." Pierson Decl. Ex. 44 (NDA). Prostar does not challenge the NDA on the grounds that it is ambiguous or embraces distinct subject matter. Indeed, it is unambiguous and embraces the same subject matter, the relationship between Prostar and Domino's vis-à-vis Prostar's work on the Solution, as the purported implied agreement. Accordingly, as of late 2015, the parties had merely agreed that Domino's might select Prostar as a vendor (through a contract with IBM). The NDA's language precludes the contradictory implied agreement that Prostar asserts. See Baker ,
2. There Is Insufficient Evidence of Intent
Domino's argues that there is no evidence that it intended to make a promise to Prostar in 2012. MSJ 12. Instead, evidence that Domino's expressly declined to enter into an agreement regarding the Solution would preclude a reasonable fact finder from determining that the parties reached a contrary implied agreement.
*1012conduct, Domino's request for modified performance in 2014, and Domino's search for a contract in 2015. Oppo. 10-13.
"California courts follow the objective theory of mutual assent under which the terms of a contract are established, not by the undisclosed intention of the promisor, but by such words or conduct as justify the promisee in understanding that the promisor intended to make a promise." People v. Randono ,
There is insufficient evidence that Domino's intended to enter into an implied agreement with Prostar. The statements and conduct Prostar puts forth express Domino's sincere interest in the Solution and a future desire to make it available to franchisees, but these are insufficient to show Domino's had the present intent to make a promise. In addition, Prostar acknowledges that IBM and Domino's "had a long-established practice" of signing PCR agreements for new projects. Domino's express refusal to sign a July 2013 PCR related to the Solution would prevent a reasonable jury from finding intent. See Oppo. 12 n. 3. Neither the 2014 changes Domino's requested nor the 2015 efforts to secure a written contract can overcome the absence of an objective manifestation of mutual assent.
3. Any Agreement Was Too Vague To Be Enforceable
Domino's argues that any agreement from 2012 is too indeterminate to form the basis for a breach of contract claim because the parties had not agreed to specific features or test results the pilot would have to produce in order to make the Solution satisfactory to Domino's. MSJ 13-14. Prostar asserts that the terms in its Statement of Work with IBM and in the 2013 PCR provide a "clear range of values from which damages can be calculated." Oppo. 11-12.
"To be enforceable, a promise must be definite enough that a court can determine the scope of the duty and the limits of performance must be sufficiently defined to provide a rational basis for the assessment of damages." Ladas v. California State Auto. Assn. ,
I agree with Domino's that any agreement the parties could be found to have reached would be too vague to provide a basis for its enforcement. It is not clear what features the Solution needed to have to meet Domino's requirements, nor is it clear what test results the parties hoped would come out of the Solution's pilot. Even accepting the premise that Domino's promised to allow Prostar to sell the Solution when it was "ready," a fact finder would have no way of assessing such readiness.
For all of these reasons, Domino's motion for summary judgment on the breach of implied contract claim is GRANTED.
C. Breach of Covenant of Good Faith and Fair Dealing
Domino's is entitled to summary judgment on Prostar's claim for breach of the covenant of good faith and fair dealing because there is no triable issue on Prostar's contract claims. See *1013Zody v. Microsoft Corp. , No. 12-CV-00942-YGR,
D. Misappropriation of Trade Secrets
Domino's argues that it is entitled to summary judgment on Prostar's misappropriation of trade secrets claim for three reasons. First, all of the asserted trade secrets were generally known. Second, some of the trade secrets were never actually shared with Domino's. Finally, Prostar failed to keep some trade secrets a secret. MSJ 15-19.
1. Whether Prostar's Trade Secrets Were Generally Known
Domino's asserts that Prostar failed to present evidence that its trade secrets were not generally known in 2015 when Domino's allegedly misappropriated them. Prostar counters that its driver tracking system was not generally known because it was specifically tailored to the pizza-delivery context and designed to integrate with Domino's Pulse system. Oppo. 25.
A trade secret is information that derives value "from not being generally known to the public or to other persons who can obtain economic value from its closure or use."See
Prostar has failed to meet its burden to create a triable issue. Prostar argues that it "created a comprehensive system to work for a target market with a very specific set of business parameters and operating challenges" and that its system "function[s] in complete integration with the existing point of sale system used by that target market." Oppo. 25. Put more simply, Prostar developed a GPS tracker specifically for pizza delivery and integrated it with the preexisting Pulse system. It asserts that "[t]here is no evidence in the record of anything in the market truly comparable." Oppo. 26. But the burden is on Prostar to make a showing that its Solution was not widely known by 2015, by which time GPS systems were common, including in the pizza delivery space. See Pierson Decl. Ex. 42 (internal Domino's presentation on Pizza Hut's announcement that it would create a GPS delivery tracker). See Integral Sys., Inc. v. Peoplesoft, Inc. , No. C90-2598-DLJ,
Without evidence that would allow a fact finder to conclude that its trade secrets are in fact trade secrets, Prostar's claims cannot proceed to a jury. Even if Prostar could present such evidence, summary judgment would be appropriate on the grounds discussed below.
2. Whether There Is Evidence That Prostar Shared Trade Secrets 2, 4, 5, 6, 7, 8, 9, And 10 With Domino's
A plaintiff asserting a misappropriation of trade secrets claim must present evidence that the defendant had access *1014to its trade secrets. Altavion, Inc. v. Konica Minolta Sys. Lab., Inc. ,
Seven of the trade secrets Prostar alleges (numbers 2 and 4-10) are algorithms that support features of the Solution it developed. See Pierson Decl. Ex. 53 (Prostar's trade secret disclosure). Domino's argues that these trade secrets cannot form the basis for Prostar's misappropriation claim because Prostar never shared them with Domino's. MSJ 16. Prostar counters that Olsen would testify at trial that the algorithms were "discernible" from technical information supplied to Domino's via email and as a result, this question should be left to a jury. Oppo. 26. In its reply, Domino's points out that Prostar has offered neither Olsen nor anyone else as an expert to offer such an opinion. Reply 14.
Prostar presents insufficient evidence to create a triable issue on its claims for trade secrets 2 and 4-10. Olsen's declaration states generally that he gave Domino's IT "information sufficient to describe Prostar's algorithms." Olsen Decl. ¶ 11. But Prostar has not presented Olsen as a technical expert who can opine on whether the algorithms were discernible from the information provided in the emails, and such an opinion would certainly require "scientific, technical, or other specialized knowledge" within the meaning of Federal Rule of Evidence 702.
3. Whether Prostar Shared Trade Secret Number 3
Domino's argues that Prostar's claim on trade secret number 3 fails because Prostar never disclosed the "complex system for receipt and immediate processing" of data that it claims. Instead, the parties merely exchanged APIs, which Prostar does not claim as trade secrets. Prostar failed to oppose these arguments. Domino's is entitled to summary judgment on the claim for misappropriation of trade secret number 3.
4. Whether Prostar Protected Trade Secret Number 1
A plaintiff bringing a misappropriation of trade secrets claim must show "a substantial element of secrecy ... so that, except by the use of improper means, there would be difficulty in acquiring the information." Walker v. Univ. Books, Inc. ,
Prostar's first asserted trade secret is for its system architecture.
*1015Ex. 53 (Prostar's trade secret disclosure) [Dkt. No. 72-53]. Domino's argues that it is not protectable because Prostar shared a diagram and other information about the system "widely and without protection," including in videos and as part of information shared with other companies.
The parties dispute only the materiality of the information shared. The diagram shows the relationships and communication paths between different parts of an overall system, and it is not clear how much more the asserted trade secret-which does encompass algorithms or other technical information-could possibly encompass. Either way, summary judgment is appropriate because of Prostar's failure to show that any of its trade secrets, perhaps in particular this "system architecture," were actually secret at the time of their alleged misappropriation.
Domino's motion for summary judgment on the misappropriation of trade secrets claim is GRANTED.
E. Tortious Interference with Prospective Economic Relations
A plaintiff alleging tortious interference with prospective economic advantage must show:
(1) the existence of a prospective business relationship containing the probability of future economic rewards for plaintiff; (2) knowledge by defendant of the existence of the relationship; (3) intentional acts by defendant designed to disrupt the relationship; (4) actual causation; and, (5) damages to plaintiff proximately caused by defendant's conduct.
PMC, Inc. v. Saban Entm't, Inc. ,
Domino's argues that Prostar's claims fail as a matter of law because there is no evidence that Domino's committed an independently wrongful act or that Prostar had an existing economic relationship with franchisees. MSJ 18-22. Prostar contends that Domino's engaged in an independently wrongful act when it committed fraud and Prostar had preexisting economic relationships with Domino's franchisees. Oppo. 24. Because there is insufficient evidence on both elements, Prostar's claim fails.
1. Wrongful Act
Because intentional interference with prospective economic advantage is not "a wrong in and of itself," a plaintiff must allege facts showing "that the defendant engaged in an independently wrongful *1016act." Korea Supply ,
Prostar asserts that Domino's committed an independently wrongful act when it committed fraud. As I conclude below, Prostar's fraud claim fails.
1. Existing Economic Relationship
Domino's argues that Prostar asserts the mere hope for an economic relationship with the undifferentiated group of Domino's franchisees. MSJ 20-21. Conversations with interested franchisees do not constitute an existing economic relationship, and neither does their willingness to participate in the free pilot.
Because tortious interference claims cannot be based on speculation alone, the California Supreme Court requires that the plaintiff "prove a business relationship with a specific third party containing 'the probability of future economic benefit to the plaintiff.' " Piping Rock Partners, Inc. v. David Lerner Assocs., Inc. ,
In one case, the court granted summary judgment because the plaintiff's " 'interference with the market' theory" was insufficient to show "an economic relationship with a prospective buyer which was reasonably likely to produce a future beneficial sale of its property." Westside Ctr. Assocs. v. Safeway Stores 23, Inc. ,
Prostar's claims fail because there is insufficient evidence to allow a reasonable fact finder to conclude that Prostar had existing economic relationships with the franchisees or the probability of future benefit. Presentations at trade shows and expressions of interest are insufficient to create an economic relationship. Although Prostar argues that the market here is "finite and specifically identifiable"-namely, Domino's franchisees-it cannot lump together allegations regarding the undifferentiated group of 11,000 Domino's stores worldwide or its 5,000 domestic stores. See Oppo. 24; AdTrader, Inc. v. Google LLC ,
Without triable issues on these elements, Prostar's claims cannot proceed to a jury. Domino's motion for summary judgment on the tortious interference claims is GRANTED.
F. Deceit and Negligent Misrepresentation
Domino's argues that Prostar's claims fail because there is no evidence of Domino's intent, statements it made were too vague to form the basis of the claims, and Prostar cannot show justifiable reliance. MSJ 22-26.
To succeed on its fraud claims, Prostar must prove: "(1) misrepresentation (false representation, concealment, or nondisclosure); (2) knowledge of falsity (scienter); (3) intent to defraud (i.e., to induce reliance); (4) justifiable reliance; and (5) resulting damage." All. Mortg. Co. v. Rothwell ,
Domino's first challenges the sufficiency of evidence showing that it had the intent to deceive. Plaintiffs cannot rely on a claim of fraud as an alternative to a contract claim absent evidence that the defendant intended "at the time of the promise not to perform it." Water, Inc. v. Everpure, Inc. , No. CV 09-3389 ABC (SSX),
Prostar has not presented sufficient evidence for a reasonable fact finder to conclude that Domino's intended to deceive it at the time of the asserted statements. In opposition, Prostar relies entirely on Domino's denial of a contractual relationship to show that the statements were made "with the obvious intent" to deceive. Oppo. 20. Prostar writes,
[I]f Domino's had no intent to defraud at the time these statements were made, then the parties had a contractual relationship. If a contractual relationship is denied, it is because Domino's never meant what it said. These specific, clear statements cannot be characterized, then or now, as innocent misunderstandings.
Oppo. 21. This circular logic will not fly. Domino's mere denial or nonperformance of its promises to Prostar cannot serve to establish that it "never meant what it said." As Domino's points out, Olsen himself testified to his belief that Domino's had acted in good faith. Olsen Depo. 172:22-173:6 (answering in the affirmative when asked whether he believed that Domino's had made the asserted promises in good faith); see MSJ 23. There is insufficient evidence to create a triable issue regarding Domino's intent.
Domino's further argues that Prostar cannot show that it justifiably relied on the asserted statements, which are too vague to form the basis for Prostar's claims. MSJ 24-25. A plaintiff must show actual reliance and that the reliance was reasonable. Reliance is reasonable if "(1) the matter was material in the sense that a reasonable person would find it important in determining how he or she would act ... and (2) it was reasonable for the plaintiff to have relied on the misrepresentation." Hoffman v. 162 N. Wolfe LLC ,
Prostar argues that far from being vague, these statements "unequivocally communicated support and ratification of Prostar's efforts on behalf of Domino's" and show Domino's "commitment to developing the Solution." Oppo. 20. I disagree. Most importantly, Domino's made these statements in the context of the parties' attempt to roll out a pilot of the Solution. Reply 12. They certainly indicate Domino's present interest and commitment to the *1019development of the tool, but Domino's also made other statements indicating its inability to commit fully. A reasonable fact finder could not conclude that Prostar reasonably relied on them to signify that Domino's planned to fully adopt, purchase, and mandate that franchisees purchase the as-yet unfinished solution.
G. Promissory Estoppel
"The elements of a promissory estoppel claim are '(1) a promise clear and unambiguous in its terms; (2) reliance by the party to whom the promise is made; (3) [the] reliance must be both reasonable and foreseeable; and (4) the party asserting the estoppel must be injured by his reliance.' " Jones v. Wachovia Bank ,
In one case, the court concluded that a bank's promise that plaintiff would receive a loan modification could not give rise to a promissory estoppel claim because it was missing essential terms, such as "payment schedules for each loan, identification of the security, prepayment conditions, terms for interest calculations, loan disbursement procedures, and rights and remedies of the parties in case of default." White v. J.P. Morgan Chase, Inc. ,
Domino's statements were not sufficiently "clear and unambiguous" to sustain a valid promissory estoppel claim because they were devoid of necessary and essential terms-or any terms at all. See White ,
Even if these statements could show a clear and unambiguous promise, Prostar has failed to demonstrate that its reliance was reasonable because of other statements by Domino's that cast doubt on its level of commitment. See Aguilar v. Int'l Longshoremen's Union Local No. 10 ,
H. Unfair Competition
Prostar's claim for unfair competition rests on its fraud claims. See FAC ¶ 189; Oppo. 22. I concluded that summary judgment is appropriate on Prostar's fraud claim, see supra Section II.F - Deceit and Negligent Misrepresentation. Accordingly, Domino's is also entitled to summary judgment; its motion is GRANTED with respect to the unfair competition claim.
III. LOST PROFITS
Domino's argues that it is entitled to summary judgment on Prostar's claim of $170 million in lost profits because as a new business, Prostar cannot calculate anticipated profits with any degree of certainty. MSJ 28-30. Prostar counters that it is entitled to damages based on a reasonable estimate of the profits it would have earned from selling the Solution to Domino's franchisees. Oppo. 28-30.
In California, an unestablished business generally cannot recover damages for anticipated future profits because "their occurrence is uncertain, contingent and speculative." Grupe v. Glick ,
In Kids' Universe , a California court of appeal concluded that the trial court correctly granted summary judgment on the question of lost profits because there was insufficient evidence to show "to a reasonable certainty that the unestablished business would have made a profit. " Kids' Universe ,
Prostar can establish with reasonable certainty neither the occurrence nor the extent of the profits it asserts. See Grupe ,
IV. MOTIONS TO SEAL
A party seeking to seal court records must overcome a strong presumption in favor of the public's right to access those records. See Ctr. for Auto Safety v. Chrysler Grp., LLC ,
The parties' motions to seal are overbroad and insufficiently justified. Requests must be "narrowly tailored to seek sealing only of sealable material." CIV. L.R. 79-5(b). The parties here seek to seal the entirety of deposition excerpts.
As the motions stand, I see compelling justifications to seal only Prostar's trade secret disclosures and substantially related email correspondence. See Dkt. Nos. 72-53; 76-43; 76-44; Nash Decl. ¶¶ 10-11. If the parties believe additional material meets this high bar, they may file amendments to their motions that comply with the Local Rules and my Standing Order on Motions to Seal. If they fail to file such amendments within fourteen (14) days of the date of this Order, the motions will be granted only with respect to docket numbers 72-53, 76-43, and 76-44.
CONCLUSION
For the reasons set forth above, Domino's motion for summary judgment is GRANTED in full. Judgment shall be entered accordingly.
IT IS SO ORDERED.
Prostar filed the complaint against Domino's Pizza, Inc., but counsel for Domino's asserted at the hearing on this motion that Domino's Pizza LLC, which performs franchisor duties, is the entity with whom Prostar collaborated throughout the relationship.
ECF page numbers will be used for exhibits.
IBM became involved as Domino's "integrator and provider of store-based projects" because it had information and contacts that would allow it to reach to Domino's franchisees. Deposition of James Maertens ("Maertens Depo.") [Dkt. No. 72-6] 62:6-63:4; see Deposition of Anthony Minniti ("Minniti Depo.") [Dkt. No. 72-10] 24:2-9. "Prostar was instructed by Domino's to work with IBM." Olsen Decl. ¶ 6.
Prostar asserts that the three companies met again in January 2011, but the exhibits it cites do not reference such a meeting. See Oppo. 3. Nash Decl. Ex. 11 [Dkt. No. 76-9], Ex. 41 [Dkt. No. 76-34].
Although franchisees can generally choose their own technology, most are required to use Pulse. Minniti Depo. 25:17-23.
The amended complaint's earliest facts about the implied in fact contract date back to 2012. See FAC ¶ 128.
Domino's made this statement in response to a request from IBM and Prostar that it make a purchase related to the Solution. Pierson Decl. Ex. 25.
Prostar does not challenge Domino's argument that the arrangement contemplated involved a flat fee or that a flat fee would be insufficient.
Prostar asserted at the hearing that it sues a different entity (Domino's Pizza, Inc.) than the entity that signed the NDA (Domino's Pizza LLC). Domino's represented that despite this discrepancy, at all times Prostar worked with Domino's Pizza LLC. Prostar offered no evidence to suggest otherwise.
Domino's asserts that Prostar withdrew its only expert witness. Reply 14.
In full, the trade secret asserted is: "Prostar-designed system server/client module architecture for a delivery driver system that allows for integration with client business systems to access data with minimal impact on client internal systems, while allowing the client to communicate with drivers, access locations, estimate time of delivery, determine actual delivery and return, track distance driven, aide in compensation compliance, allow credit card payment processing at the door, provide customer notifications of eminent delivery, and increase deliver safety and security monitoring." Pierson Decl. Ex. 53.
Domino's further points out that Prostar shared the conceptual design overview and the technical specifications of the Solution with Patxi's Pizza and On-The-Mark (an IT firm) without requiring them to sign nondisclosure agreements. See Olsen Depo. 201:3-203:6; Reply 16-17.
In addition, Olsen promptly reached out to the accidental recipient of one email, who promptly deleted it. Oppo. 27.
Domino's asserts that the fraud claim cannot serve as an independently wrongful act for another reason: Olsen testified that "none of Domino's purported misrepresentations to Prostar interfered with the franchisee relationships." Reply 12; see Olsen Depo. 168:19-170:8. Rather, Domino's interfered when it failed to hold up its end of the bargain and allow Prostar to sell the Solution.
Eight franchisees tested the Solution for free.
When asked, "And so is it fair to say you don't know ultimately whether [franchisee Charles Bell] would have agreed down the line to buy driver tracking either?" Maertens of IBM testified, "I don't know." Maertens Depo. 291:25-292:4. Many franchisees decided not to go ahead even with the free test. See id. 281:18-285:6.
The quotes redacted in briefs demonstrate the breadth of the parties' requests. For example, there are not compelling justifications to seal the following sentence: "Prostar admits the proposal was to get the 'ideas flowing' about product and pricing." See MSJ 29.