Citcon USA, LLC v. MaplePay Inc.

Background

Citcon alleged that defendants misappropriated its trade-secret source code. The Fourth Amended Complaint asserted claims under the federal Defend Trade Secrets Act and the California Uniform Trade Secrets Act against Hang “Hank” Miao and Dino Lab, Inc.

Citcon alleged that Dino Lab provided contract coding services, that Miao and Hua had access to Citcon’s source code, and that the code was copied and transferred to RiverPay. Citcon further alleged that Miao acted as a Dino Lab employee or agent and that Dino Lab was responsible for the alleged misappropriation through vicarious liability, meaning liability for an employee’s or agent’s conduct.

Claims Against Miao

The court held that Citcon still had not pleaded enough specific facts to state a plausible trade-secret-misappropriation claim against Miao. The allegations did not clearly explain who misappropriated the code, how Miao participated, when or where the conduct occurred, or what “via Hua” and “taken through Dino Lab to RiverPay” meant.

The court also found that Citcon had not adequately identified which version of the source code Miao allegedly misappropriated. The allegations were difficult to reconcile with Citcon’s earlier position in a related proceeding that Hua was the person who delivered the same source code to RiverPay. The court concluded that Citcon’s allegations did not sufficiently exclude that alternative explanation and therefore failed to state a plausible claim under either federal or California law.

Claims Against Dino Lab

The court first rejected defendants’ argument that claim preclusion, also called res judicata, barred Citcon’s claims against Dino Lab. Although the earlier related proceeding involved a final judgment on trade-secret claims, the court found insufficient facts showing that Hua and Dino Lab were legally in privity at the time of the alleged misappropriation.

The court nevertheless held that Citcon failed to state a claim against Dino Lab. Because Citcon had not stated a claim against Miao, Dino Lab could not be vicariously liable for Miao’s alleged conduct. The court also found that Citcon’s allegations concerning Hua were implausible and contradicted by Citcon’s earlier pleadings and positions, which described Hua as a full-time Citcon employee and a former Dino Lab employee.

The court further found that the allegations about Hua’s claimed “hybrid” status lacked enough detail to determine whether he was a Dino Lab employee or agent, what the consulting arrangement involved, or whether he acted within the scope of any Dino Lab employment when the alleged misappropriation occurred. The court also noted that the earlier jury proceeding found Hua not liable for misappropriation.

Disposition

The court granted defendants’ motion to dismiss the Fourth Amended Complaint. It denied leave to amend, finding that further amendment would be futile after Citcon had received multiple opportunities to plead its claims. The order addressed the claims against Miao and Dino Lab; the opinion states that other defendants had previously been dismissed on different grounds.