Labelbox v. Gujarati

Background

Labelbox sued Kshitij Gujarati, V7 Co., V7 Ltd., and Alberto Rizzoli. It alleged that Gujarati, while employed at Labelbox and interviewing with V7, accessed and downloaded Labelbox documents involving clients, internal processes, technical information, pricing, and other confidential or trade-secret information. Labelbox alleged that some of Gujarati’s activity corresponded to requests from Rizzoli for assistance with V7 proposals. Labelbox asserted a federal claim under the Defend Trade Secrets Act and several state-law claims.

The V7 Defendants moved to dismiss Labelbox’s state-law claims. The court considered the motion without oral argument.

California trade-secret-law rule

The California Uniform Trade Secrets Act, or CUTSA, provides the exclusive civil remedy for conduct within its scope and supersedes other civil claims based on the same core facts as trade-secret misappropriation. A claim may proceed separately if it is based on a different property right or on wrongdoing materially different from the alleged misappropriation. At the pleading stage, the question is whether the allegations, after removing the trade-secret allegations, still independently support another claim.

Tortious-interference claims

Labelbox alleged that the V7 Defendants interfered with Gujarati’s confidentiality agreement and with Labelbox’s relationship with a client by using Labelbox’s confidential, proprietary, and trade-secret information. The court concluded that these claims alleged no distinct wrongdoing or separate property interest. The court therefore granted the motion to dismiss the tortious-interference-with-contract and tortious-interference-with-prospective-business-advantage claims as superseded by CUTSA.

Aiding and abetting breach of loyalty

Labelbox alleged that the V7 Defendants encouraged Gujarati to breach his duty of loyalty by soliciting information about Labelbox clients. The court concluded that the claim, as pleaded, was based on Gujarati’s alleged misappropriation of confidential and trade-secret information. The court granted the motion to dismiss this claim as superseded by CUTSA. The court noted that a duty of loyalty might encompass conduct broader than disclosure of trade secrets, but found that Labelbox’s amended complaint did not allege such separate conduct.

Unfair competition

Labelbox’s claim under California’s Unfair Competition Law alleged that the V7 Defendants facilitated the misappropriation of confidential and trade-secret information. Because the alleged unlawful or unfair conduct depended exclusively on that alleged misappropriation, the court granted the motion to dismiss the unfair-competition claim as superseded by CUTSA.

Civil conspiracy

Labelbox alleged that the defendants conspired to misappropriate its confidential, proprietary, and trade-secret information. Because the complaint alleged no conspiratorial conduct separate from that alleged misappropriation, the court granted the motion to dismiss the civil-conspiracy claim as superseded by CUTSA.

Conversion

The court addressed Labelbox’s conversion claim separately. The opinion states that Labelbox did not oppose dismissal because discovery had not revealed evidence involving physical property. The court granted the motion to dismiss the conversion claim.

Disposition

The court granted the V7 Defendants’ motion to dismiss Labelbox’s state-law claims against them as superseded by CUTSA. The court granted Labelbox leave to amend to the extent it can plausibly allege wrongdoing distinct from the alleged misappropriation of confidential, proprietary, or trade-secret information. Labelbox’s amended complaint is due April 10, 2026. Labelbox may not add parties or claims without further leave of court. The order disposes of Docket No. 75.