Cloudera, Inc. v. Databricks, Inc.

Background

Cloudera brought claims against Databricks and Richard Doverspike. Cloudera alleged violations of the federal Defend Trade Secrets Act and the Georgia Trade Secrets Act. It also alleged that Databricks tortiously interfered with Cloudera’s contracts by inducing employees to disclose confidential information and by recruiting Cloudera employees in violation of their agreements. Doverspike separately faced claims under the Computer Fraud and Abuse Act, the Georgia Computer Systems Protection Act, and contract provisions concerning confidential information and customer solicitation.

Doverspike moved to compel arbitration based on a Mutual Arbitration Agreement. The Georgia district court granted that motion and stayed Cloudera’s claims against Doverspike while arbitration proceeded. That court also transferred Cloudera’s claims against Databricks to the Northern District of California. Databricks then asked this court to stay the entire case until the arbitration ended and moved to dismiss Cloudera’s amended complaint under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states a legally sufficient claim.

Motion to Stay

The court denied the motion to stay. Applying the factors for a discretionary stay, the court found that Cloudera had shown a fair possibility of harm from losing evidence. Cloudera pointed to allegations that former employees had destroyed or deleted information, including an allegation that one employee overwrote a laptop hard drive with copies of the movie "WALL-E."

Because Cloudera showed a possible risk of harm, Databricks had to show a clear case of hardship or unfairness from proceeding. The court found that Databricks had not made that showing. It also concluded that the arbitration was unlikely to simplify the case substantially because Cloudera alleged that Databricks was responsible for the alleged misappropriation involving several employees besides Doverspike. The court further noted that inconsistent rulings could occur even if it granted a stay.

Trade-Secret Claims

The court denied dismissal of Cloudera’s trade-secret misappropriation claims. It found the allegations sufficient at the pleading stage to support a plausible inference that Databricks was involved in specific instances of misappropriation. The complaint alleged, among other things, that former employees sent Databricks presentations and other information concerning Cloudera’s relationship with Microsoft, that Terry Savage discussed Cloudera clients and trade-secret information during the hiring process, and that Savage later sent a contact list to his personal email and stored trade-secret information on external storage devices.

The court also found sufficient allegations that Cloudera took reasonable steps to protect its information, including non-compete agreements, cybersecurity measures, and training concerning trade secrets. Finally, the court found that Cloudera adequately alleged injury, including harm to its reputation, customer base, and economic advantage. The court therefore denied Databricks’s motion to dismiss the trade-secret claims.

Tortious-Interference Claims

The court dismissed Cloudera’s tortious-interference claim based on alleged disclosure of confidential information without leave to amend. Cloudera conceded that the claim was preempted by the Georgia Trade Secrets Act because it relied on the same factual allegations as the trade-secret claim and did not involve separate conduct.

The court dismissed Cloudera’s tortious-interference claim based on employee recruiting with leave to amend. Cloudera alleged that John Nieters and other employees recruited Cloudera employees for Databricks in violation of their employment agreements. But the court found that the complaint relied only on conclusory allegations made on information and belief and did not provide enough factual support for the alleged recruiting.

The court deferred ruling on whether the non-solicitation provisions were enforceable. It explained that the complaint referred to employees in various unspecified jurisdictions and did not provide enough information to determine which laws might apply. The court stated that an amended complaint should include basic facts about the relevant individuals, including their residences, work locations, and whether they worked remotely.

Disposition

The court denied the motion to stay and granted in part and denied in part the motion to dismiss. Dismissal was with leave to amend except where the court stated otherwise. The non-disclosure tortious-interference claim was dismissed without leave to amend, while the non-solicitation tortious-interference claim was dismissed with leave to amend. Any amended complaint had to be filed within 21 days of the order.