The Decision Clarifies and Solidifies Some Cutting-Edge Areas of California Law

On March 26, Mintz achieved a favorable outcome for its client Silanna Semiconductor North America, Inc. (Silanna), a San Diego-based manufacturer and distributor of high-voltage power-conversion systems and four of Silanna’s employees, when the U.S. District Court for the Southern District of California granted its motion to dismiss claims of breach of contract and trade secret misappropriation, among others.

In May of 2019, Silicon Valley-based industry competitor Power Integrations, Inc. filed an action in the U.S. District Court for the Northern District of California against Silanna and certain of its employees alleging that four former Power Integrations engineers based in the Philippines breached the non-compete and non-solicitation provisions in their employment contracts and engaged in trade secret theft.

In response to the complaint, Mintz filed a motion to dismiss pursuant to two Federal Rules of Civil Procedure, arguing that the venue was improper, and separately, arguing failure to state a claim upon which relief can be granted. In doing so, the Mintz team was able to get the case transferred to the U.S. District Court for the Southern District of California.

Approximately two weeks after receiving the case in the Southern District, U.S. District Judge Hon. Michael M. Anello issued a decision ruling completely in defendants’ favor and striking down the foundation of Power Integrations’ claims. Importantly, this decision clarifies and solidifies some cutting-edge areas of California law, including choice of law analysis on issues of fundamental public policy and the enforceability of non-solicitation agreements in California.

The ruling provides the direct statements of law that: (1) Application Group v. Hunter Group applies to invalidate choice of law provisions that contradict the fundamental public policies of California even when the employee does not reside in California; (2) employee mobility is a fundamental public policy in California; (3) there is no trade secret exception to California’s ban on restrictive covenants; (4) non-solicitation agreements are void in California; and (5) a trade secret plaintiff, including actions under the federal Defend Trade Secrets Act, must plead facts of actual misappropriation to survive a motion to dismiss.

“We are pleased with Judge Anello’s decision and its implications for our client, as well its impact on how future breach of contract and trade secret claims in California will be assessed,” said Mintz Member Micha “Mitch” Danzig.

The case, Power Integrations, Inc., v. Edison D. De Lara, et al., is now pending in the U.S. District Court of the Southern District of California.

The Mintz team advising Silanna is led by Mr. Danzig and Associate Paul Huston, and includes Member Stephen Akerley, and Associates Audrey Nguyen and Morgan Tanafon.