Regal W. Corporatoin, Corp. v. Nguyen

412 F.Supp.3d 1305

REGAL WEST CORPORATOIN, a Washington Corporation, Plaintiff,

v.Minh Khai NGUYEN, an Individual, Defendant.

CASE NO. 3:19-cv-05374-RBL

United States District Court, W.D. Washington, at Tacoma.

Signed September 30, 2019

Jodi Benassi, McDermott Will & Emery (SF), San Francisco, CA, Mary D Hallerman, Nicole Jantzi, Paul M. Schoenhard, Sarah P. Hogarth, McDermott Will & Emery (DC), Washington, DC, John C Guadnola, Gordon Thomas Honeywell LLP (TAC), Tacoma, WA, for Plaintiff.

Erynn L. Embree, Inge Larish, Irvine, CA, L Rex Sears, Maschoff Brennan, Salt Lake City, UT, for Defendant.

ORDER ON MOTION TO DISMISS

DKT. # 31

Ronald B. Leighton, United States District Judge

INTRODUCTION

THIS MATTER is before the Court on Defendant Minh Khai Nguyen's Motion to Dismiss Plaintiff Regal West Corporation's First Amended Complaint (FAC). Dkt. # 31. Regal alleges claims related to Nguyen's misuse of Regal's secret information and intellectual property. Nguyen argues that the Court lacks personal jurisdiction because all of the alleged misuse occurred outside Washington. Nguyen also argues that Regal's Lanham Act claims, trade secrete misappropriation claims, and Computer Fraud and Abuse Act (CFAA) claim are implausible.

In response, Regal contends that Nguyen waived several of his arguments by failing to raise them in his motion to dismiss the initial complaint, which was withdrawn. See Dkt. # 24. Alternatively, Regal contends that the Court does not lack personal jurisdiction and that its claims satisfy Rule 12(b)(6).

For the following reasons, the Court GRANTS Nguyen's Motion to Dismiss with respect to Regal's false advertising and CFAA claims but otherwise DENIES Nguyen's Motion.

BACKGROUND

Regal provides its customers with "complete end-to-end logistics solutions, including cross-docking, transportation, and assembly and repackaging services." Dkt. # 27 at 3. Regal alleges that it began developing software that would allow its customers to access real-time information about inventory and shipments decades ago. Around 1999, Regal contracted with a third-party company to continue developing this software, at which time Nguyen was a subcontractor or employee of this third party.

Around 2000, Nguyen took the lead on Regal's software development project and visited Regal's place of business in Fife, Washington, to discuss the project. Nguyen continued to work for Regal for roughly 20 years in this capacity, during which time Nguyen allegedly "was given access to ... Regal's customer database and customer-coding system, as well as pricing information, Regal's customer contracts, and Regal's accounting system." Dkt. # 27 at 5. This was "solely for the purpose of developing and maintaining Regal's software and with the understanding that Nguyen would not disclose such confidential and proprietary information." Id. Regal and Nguyen parted ways in February 2019 when Regal terminated its relationship with Nguyen's company, Softketeers, Inc.

Regal alleges that Nguyen stole its proprietary information and trademarks while working for Regal to further Nguyen's new business venture, Retail Exchange Network, Inc. (RXN). According to Regal, RXN advertises itself as "an outgrowth of a warehouse management proprietary information technology systems [sic] that has been in place and developed over the last decade." Dkt. # 27 at 6. Regal claims that this description refers to Regal's own custom software that Nguyen helped develop. Regal also alleges that RXN is using Regal's customer database and coding system, based partly on images that RXN uses in its online videos. One of those videos also includes background images of Regal's warehouse and a list of several Regal companies, such as Walmart and Amazon.com.

In its initial complaint, Regal sued both Nguyen and one of Nguyen's companies, Softketeers, Inc. Dkt. # 1. That complaint included contract- and fraud-based claims against both defendants. Nguyen moved to dismiss, stay, or transfer Regal's initial complaint but withdrew his motion after Regal amended its complaint. Dkt. # 30. Regal's FAC dropped Softketeers as a defendant and omitted the three contract-based claims against Nguyen and Softketeers. Nguyen then brought the current Motion challenging the FAC.

DISCUSSION

1. Waiver

Because Nguyen already moved to dismiss Regal's initial complaint without contesting personal jurisdiction or Regal's trademark infringement and unfair competition claims, Regal contends that Nguyen cannot raise those arguments now. Nguyen responds that, because the initial Complaint contained contract claims against Nguyen and Softketeers that clearly supported personal jurisdiction, a 12(b)(2) defense was not available at that time. Regal replies that the defense was available at the time of Nguyen's first motion because personal jurisdiction must exist for each claim and each defendant individually.

Federal Rule 12(b)(2) allows a party to move to dismiss for "lack of personal jurisdiction." According to Rule 12(g) & (h), a party waives "any defense listed in Rule 12(b)(2)–(5)" by failing to raise it in an initial motion to dismiss if the defense was "available to the party" at the time. This means that "defendants do not waive the defense of personal jurisdiction if it was not available at the time they made their first defensive move." Glater v. Eli Lilly & Co. , 712 F.2d 735, 738 (1st Cir. 1983) (finding that the defense was not waived because the original complaint "did not put it on notice that her New Hampshire domicile was at least questionable").

Here, the "lack of personal jurisdiction" defense was not available to Nguyen before Regal amended its Complaint. As regal appears to concede, the contract-based claims from the initial Complaint made it indisputable that the Court had jurisdiction. Furthermore, those claims were asserted against both Defendants, which means that the Court did not have jurisdiction just over Softketeers. Consequently, because the Court had jurisdiction over both Defendants, Nguyen's only viable argument was that the Court should decline to exercise pendent jurisdiction over the tort claims asserted against him. See Action Embroidery Corp. v. Atl. Embroidery, Inc. , 368 F.3d 1174, 1180 (9th Cir. 2004) ("[A] court may assert pendent personal jurisdiction over a defendant with respect to a claim for which there is no independent basis of personal jurisdiction so long as it arises out of a common nucleus of operative facts with a claim in the same suit over which the court does have personal jurisdiction."). But Rule 12(b)(6) provides a defense when the court lacks jurisdiction, which is not the same as having discretion to exercise jurisdiction or not. The defense that the Court entirely lacked personal jurisdiction over Nguyen was thus not available and Nguyen can assert it here.

On the other hand, Regal is correct that Nguyen waived his 12(b)(6) defense to Regal's Lanham Act claims of trademark infringement and unfair competition by failing to raise them in his prior motion. Regal's original complaint contained these claims, yet Nguyen did not address them in his prior motion to dismiss. See Dkt. # 1 at 16-20; Dkt. # 24. Nguyen himself seems to recognize this by making no argument against waiver of these claims and failing to revisit them in his Reply brief. Dkt. # 36 at 9-12. Consequently, the Court will not consider Nguyen's arguments regarding trademark infringement and unfair competition.

2. Personal Jurisdiction

When a defendant moves to dismiss a complaint for lack of personal jurisdiction, the plaintiff bears the initial burden of demonstrating that jurisdiction is appropriate, after which the burden shifts to the defendant to demonstrate that jurisdiction is unreasonable. Schwarzenegger v. Fred Martin Motor Co. , 374 F.3d 797, 800 (9th Cir. 2004). A plaintiff cannot simply rest on the bare allegations of its complaint, but rather is obligated to come forward with facts, by affidavit or otherwise, supporting personal jurisdiction. Amba Marketing Systems, Inc. v. Jobar International, Inc. , 551 F.2d 784, 787 (9th Cir. 1977). Where the motion is based on written materials rather than an evidentiary hearing, the plaintiff need only make a prima facie showing of jurisdictional facts. Schwarzenegger , 374 F.3d at 800. A prima facie showing means that the plaintiff has produced admissible evidence, which, if believed, is sufficient to establish the existence of personal jurisdiction. Ballard v. Savage , 65 F.3d 1495, 1498 (9th Cir. 1995). "Conflicts between parties over statements contained in affidavits must be resolved in the plaintiff's favor." Schwarzenegger , 374 F.3d at 800. However, a district court also may order discovery where "pertinent facts bearing on the question of jurisdiction are controverted or where a more satisfactory showing of the facts is necessary." Laub v. U.S. Dep't of Interior , 342 F.3d 1080, 1093 (9th Cir. 2003) (quoting Butcher's Union Local No. 498 v. SDC Inv., Inc. , 788 F.2d 535, 540 (9th Cir. 1986) ).

A court's personal jurisdiction analysis begins with the "long-arm" statute of the state in which the court sits.

Glencore Grain Rotterdam B.V. v. Shivnath Rai Harnarain Co. , 284 F.3d 1114, 1123 (9th Cir. 2002). Washington's long-arm statute, RCW 4.28.185, extends the court's personal jurisdiction to the broadest reach that the United States Constitution permits, so the jurisdictional analysis under state law and federal due process are the same.¹ Byron Nelson Co. v. Orchard Management Corp. , 95 Wash.App. 462, 465, 975 P.2d 555 (1999) ; Schwarzenegger , 374 F.3d at 800–01.

Personal jurisdiction exists in two forms: general and specific. Dole Food Co. v. Watts , 303 F.3d 1104, 1111 (9th Cir. 2002). For specific jurisdiction, which is at issue here, the Ninth Circuit applies a three-prong test. Schwarzenegger , 374 F.3d at 802. First, "[t]he non-resident defendant must purposefully direct his activities or consummate some transaction with the...