Investment · Tech

Startups Overstating Progress

SAN FRANCISCO, CA – Theranos is in the news for overstating what it’s products/services could do, but it is not the only startup accused of overstating progress to keep cash flowing. Drone maker Lily was sued by the SF District Attorney for overstating what it’s throw-and-follow-you drone could do, prompting the company to refund pre-order money and ultimately file for bankruptcy protection. And, just recently, a water bottle company was sued.

Three plaintiffs: Winston Ibrahim; S.A. Ibrahim and Alan Sheriff are suing: Jay Parekh; Aakash Mathur aka Kash Mathur; Alexander Mittal; Arjun Srinivas; and Michael Young alleging that they induced plaintiffs to invest in Hydros, a filtering water bottle. Plaintiffs say defendants falsely touted the bottle as being able to filter water at higher rates of flow than competing filters like Brita even though the technology did not work.

This blog reports on cases filed in and around the San Francisco Bay Area. The statements made are based on the allegations in court-filed documents. Allegations are just accusations, and may or may not be true.
The authors of the blog are attorneys at the San Francisco litigation firm, Wood Robbins, LLP. If you have a legal issue, send them an email. If they cannot help you, they will try and point you in the right direction.
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Commercial · Trade Secret

Oakland Coffee Companies Fight; Blue Bottle Named in RICO Action

U.S.D.C. Nor. Cal. – A 59 page complaint filed in U.S. District Court for the Northern District of California tells the tale of a coffee scandal involving famed Blue Bottle Coffee. Plaintiff Mocha Mill, an Oakland company, alleges that its CEO conspired with competitor Port of Mokha to steal Mocha Mill’s product and distribution relationships.

According to the complaint, Mocha Mill spent thousands of dollars sending its CEO on extended educational trips around the world, forming relationships with Yemeni farmers and refining the processes to make Yemeni coffee. Mocha Mill alleges these efforts were successful in creating a new buzz for the product.

As soon as the CEO realized that they were on the right track, it is alleged that he shopped it for himself, including conspiring with Port of Mokha and distributor Blue Bottle, to convince unwitting Mocha Mill investors that their product had no value.

This will be an interesting case for Judge Laurel Beeler, one of the better judges on the N.D.Cal. roster.

This blog reports on cases filed in and around the San Francisco Bay Area. The statements made are based on the allegations in court-filed documents. Allegations are just accusations, and may or may not be true.
The authors of the blog are attorneys at the San Francisco litigation firm, Wood Robbins, LLP. If you have a legal issue, send them an email. If they cannot help you, they will try and point you in the right direction.
Trade Secret

In Trial: Lawyers Battle Over Client… Information

SAN FRANCISCO, CA – According to defendant’s trial brief, a Los Angeles firm, SwedelsonGottlieb, sent an associate, William Noland, to open an office in San Francisco, which he did successfully. When the associate did not make partner, he went off on his own and got sued by his former employer out of “anger and spite.” According to the Complaint, Mr. Noland solicited SwedelsonGottlieb’s clients to go with him before and after his departure and took/used proprietary client data in the process.

Litigation is about storytelling as much as anything else. The stories told in almost every trade secret case of this type are the same. The defendant says the employer is just trying to bury their startup with attorney’s fees and costs. The plaintiff claims legitimate trade secret information existed and was misused.

In many instances, both stories are true. Often plaintiffs are disgruntled and looking for revenge. Equally as often, departing employees do not get good advice, or do not listen to it, and use more information than they should. Emotion, and specifically anxiety, drives the parties to costly outcomes.

Per defendant’s brief, Mr. Noland had incurred $500,000 in legal fees and costs, and trial obviously had not yet begun.

This blog reports on cases filed in and around the San Francisco Bay Area. The statements made are based on the allegations in court-filed documents. Allegations are just accusations, and may or may not be true.
The authors of the blog are attorneys at the San Francisco litigation firm, Wood Robbins, LLP. If you have a legal issue, send them an email. If they cannot help you, they will try and point you in the right direction.
Commercial

Sonnen Motorcars Sues Many for Embezzlement, $7.4 Million

MARIN, CA – This civil complaint follows criminal proceedings against three managers at the Sonnen car dealerships in Marin. The managers are alleged to have orchestrated an embezzlement scheme that primarily involved paying fake advertising vendors. Per the allegations, the payments largely went back to the embezzlers.

Though most of the defendant companies are alleged to be complete shams, at least one is a going business in San Francisco, a glass company called San Francisco MAZ. The complaint alleges members of the Maroufi family were involved in the scam, including the owner of San Francisco MAZ, Maury Maroufi, who the complaint alleges embezzled $38,000 by submitting fake invoices for payment.

Setting up fake vendors is in the top five list of methods embezzlers use to steal from unwitting corporate owners. Be careful out there.

This blog reports on cases filed in and around the San Francisco Bay Area. The statements made are based on the allegations in court-filed documents. Allegations are just accusations, and may or may not be true.
The authors of the blog are attorneys at the San Francisco litigation firm, Wood Robbins, LLP. If you have a legal issue, send them an email. If they cannot help you, they will try and point you in the right direction.
Commercial

When to Leave Your Employer, Before Competing with Them

SAN FRANCISCO, CA – An interesting complaint was filed on the 30th by Bette Solis against Worldpay US, Inc. Ms. Solis alleges that she was an account executive at the payment processing company and, per contract, was entitled to commissions on accounts she procured. The complaint says defendant stopped paying, claiming Ms. Solis started a new competing business while still working for them.

The case raises a few questions that come up often. First, is it ok to work for two places at once? In general, employees owe fiduciary duties to their employers and cannot secretly compete with them. There are a line of cases that say it is ok to prepare to start a new job/company while still on payroll, but not to the point of compeintg. There is also some authority saying moonlighting is ok, but again probably not if the gig directly competes.

There is another legal rule in play here and that is with respect to contractual obligations post-breach. In general, if one party breaches a contract, the other party is excused from further performance. Whether forming a new competing company constitutes a breach will depend on the facts. There are also issues in the Solis case related to terms and conditions allegedly never provided, and potentially unenforceable non-compete clauses therein.

This blog reports on cases filed in and around the San Francisco Bay Area. The statements made are based on the allegations in court-filed documents. Allegations are just accusations, and may or may not be true.
The authors of the blog are attorneys at the San Francisco litigation firm, Wood Robbins, LLP. If you have a legal issue, send them an email. If they cannot help you, they will try and point you in the right direction.
Trade Secret

Ventek Sues California Parks Company Alleging Employee/Trade Secret Theft

SAN FRANCISCO, CA – The complaint alleges that: the two companies entered into an agreement to join forces and bid on a National Park Service contract; the agreement prohibited taking proprietary information and/or soliciting employees; and defendant did both.

Key to the case will be whether there were trade secrets, and second whether they were incorporated into the defendants’ work product. That will likely determine whether the contractual terms are enforced.

While everyone in California seems to know that non-compete clauses are generally unenforceable, what is not common knowledge is that that non-solicitation clauses are hard to enforce as well. The California Supreme Court made clear in a case called Edwards v. Arthur Andersen that employee mobility is critical. The basic rule is: employers can protect trade secrets but not via contractual clauses that make it impossible for employees to work and ply their trade.

The other interesting aspect of the case is that it is filed in federal court. Until recently, trade secret cases were litigated in state court. President Obama signed the Defend Trade Secrets Act (18 U.S.C. § 1836) in 2016, making federal court an option.

This blog reports on cases filed in and around the San Francisco Bay Area. The statements made are based on the allegations in court-filed documents. Allegations are just accusations, and may or may not be true.
The authors of the blog are attorneys at the San Francisco litigation firm, Wood Robbins, LLP. If you have a legal issue, send them an email. If they cannot help you, they will try and point you in the right direction.