Luminate Home Loans, Inc. v. Better Mortgage Co. et al

- 1 - 24cv2251
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF CALIFORNIA
LUMINATE HOME LOANS, INC.,
Plaintiff,
v.
BETTER MORTGAGE CO., et. al,
Defendants.
Case No. 24-cv-02251-BAS-MSB
ORDER GRANTING IN PART,
DENYING IN PART
COUNTERCLAIM DEFENDANT’S
MOTION TO DISMISS AND STRIKE
COUNTERCLAIMS OF HORANYI
AND LEE (ECF No. 57)
DANIEL HORANYI and JEANETTE
LEE.,
Counterclaimants,
v.
LUMINATE HOME LOANS, INC.,
Counterclaim Defendant.
Pending before the Court is a motion to dismiss (ECF No. 57) submitted by Luminate
Home 	Loans, 	Inc., 	(“Luminate”), 	Luminate 	Bank, 	and 	Taryn 	Reuter 	(“Reuter”)
(collectively, “Counter-Defendants”) to strike counterclaims submitted by Daniel Horanyi
(“Horanyi”) and Jeanette Lee (“Lee”) (collectively, “Counter-Plaintiffs”) (ECF No. 43).
For the reasons below, the Court GRANTS IN PART and DENIES IN PART the
motion to dismiss. (ECF No. 57.)
I. 	BACKGROUND
Case 3:24-cv-02251-BAS-MSB Document 115 Filed 01/14/26 PageID.<pageID>
Page 1 of 43

- 2 - 24cv2251
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
Luminate is a mortgage loan lender. In 2022, Luminate acquired a mortgage division
known as NEO Home Loans (“NEO”) from a competitor, Celebrity Home Loans LLC
(“Celebrity”). 	(ECF No. 43 ¶¶ 2, 15, 17–26.) 	In acquiring NEO, Luminate had entered
into an agreement with Celebrity to acquire NEO’s intellectual property – such as its “Neo
Home Loans” trademark, employee training, financial analysis, and marketing materials.
(Id. ¶¶ 15–16.) Horanyi was initially a NEO Home Loans manager at Celebrity and served
as a NEO Division President within Luminate after making the transition from Celebrity
upon Luminate’s acquisition of NEO in 2022. 	(Id. ¶¶ 2, 22, 135.) 	Lee was also a NEO
Home Loans manager at Celebrity and joined Luminate upon Luminate’s acquisition of
NEO. (Id. ¶ 2.) Prior to joining Luminate, Horanyi and Lee discussed their prospective
new positions with Reuter, who is the CEO of Luminate. 	Reuter allegedly promised
Horanyi and Lee that NEO would retain its operational independence and intellectual
property. (Id. ¶ 2.) Reuter also allegedly promised Horanyi and Lee that they could solicit
other NEO employees to leave Luminate without repercussions. (Id. ¶¶ 2, 24.)
Upon discovering Horanyi and Lee were sharing Luminate’s financial and employee
data with a newly founded competitor, Better Mortgage Loans, Luminate terminated the
employment of Horanyi and Lee in October 2024. 	(Id. ¶¶ 37–38.) 	Upon termination,
Luminate allegedly delayed payment of their wages and failed to pay other balances owed.
(Id. ¶ 45.)
On December 2, 2024, Luminate initiated this action against multiple defendants,
including Horanyi and Lee. 	(ECF No. 1.) 	On June 30, 2025, Horanyi and Lee filed
counterclaims against Luminate and Reuter, bringing the following causes of action (ECF
No. 43):
1. Count I: Failure to Provide Required Meal Periods (Horanyi) (Cal. Lab. Code §§
226.7, 512)
2. Count II: Failure to Provide Required Rest Periods (Horanyi) (Cal. Lab. Code §§
226.7, 512)
Case 3:24-cv-02251-BAS-MSB Document 115 Filed 01/14/26 PageID.<pageID>
Page 2 of 43

- 3 - 24cv2251
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
3. Count III: Failure to Pay Overtime Wages (Horanyi) (Cal. Lab. Code §§ 510,
1194, 1198)
4. Count IV: Failure to Pay Minimum Wages (Horanyi) (Cal. Lab. Code §§ 1194,
1197)
5. Count V: Liquidated Damages (Horanyi) (Cal. Lab. Code § 1194.2)
6. Count VI: Failure to Provide Accurate Wage Statements (Cal. Lab. Code § 226)
7. Count VII: Failure to Pay Final Wages/Waiting-Time Penalties for Nonpayment
of Wages under the California Labor Code
8. Count VIII: Failure to Reimburse Expenses & Losses (Cal. Lab. Code §2802)
9. Count IX: Violation of Labor Code Sections 432.5 and 925, and Section 16600
et. seq. of the California Business and Professions Code
10. Count X: Wrongful Termination in Violation of Public Policy (Gov’t Code
§12940 et. seq.)
11. Count XI: Defamation
12. Count XII: Tortious Interference with Prospective Economic Advantage
13. Count XIII: Breach of Contract
14. Count XIV: Breach of Implied Covenant of Good Faith and Fair Dealing
15.Count XV: Unjust Enrichment
16.Count XVI: Fraudulent Misrepresentation
17.Count XVII: Unfair Business Practices (Cal. Bus. & Prof. Code §17200)
18.Count XVIII: Conversion
19.Count XIX: Accounting
20.Count XX: Declaratory Relief
21.Count XXI: Violation of California Invasion of Privacy Act (California Penal
Code § 632)
22.Count XXII: Punitive Damages
Counter-Defendants moved to dismiss Counter-Plaintiffs’ counterclaims (ECF No.
57). Counter-Plaintiffs filed an opposition to Counter-Defendants’ motion to dismiss (ECF
Case 3:24-cv-02251-BAS-MSB Document 115 Filed 01/14/26 PageID.<pageID>
Page 3 of 43

- 4 - 24cv2251
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
No. 75). Counter-Defendants then filed a reply in support of their motion to dismiss. (ECF
No. 82).
The Court finds Counter-Defendants’ motion to dismiss (ECF No. 57) appropriate
to rule on the papers and without oral argument. See CivLR 7.1.d.1.
II. 	LEGAL STANDARD
Federal Rule of Civil Procedure 12(b)(6) allows a party to move to dismiss based on
the legal sufficiency of the claims asserted in the complaint. 	Navarro v. Block, 250 F.3d
729, 732 (9th Cir. 2001). 	The court must accept all factual allegations pleaded in the
complaint as true and draw all reasonable inferences from them in favor of the nonmoving
party. 	Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337–38 (9th Cir. 1996). 	To avoid a
Rule 12(b)(6) dismissal, a complaint need not contain detailed factual allegations; rather,
it must plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570 (2007). 	“A claim has facial plausibility when the
plaintiff pleads factual content that allows the court to draw the reasonable inference that
the defendant is liable for the misconduct alleged.” 	Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009) (citing Twombly, 550 U.S. at 556). “Where a complaint pleads facts that are ‘merely
consistent with’ a defendant's liability, it ‘stops short of the line between possibility and
plausibility of entitlement to relief.’” Id. (quoting Twombly, 550 U.S. at 557).
III. 	ANALYSIS
A. 	California Labor Code
1. 	California Executive Exemption to Wage and Hour Claims
Horanyi asserts counterclaims against Counter-Defendants for violating California
Labor Code provisions governing meal periods (Cal. Lab. Code §§ 226.7, 512) (ECF No.
43 ¶¶ 64–70) (Count I), rest periods (Cal. Lab. Code §§ 226.7, 512) (ECF No. 43 ¶¶ 71–
74) (Count II), overtime wages (Cal. Lab. Code §§ 510, 1194, 1198) (ECF No. 43 ¶¶ 75–
79) (Count III), minimum wages (Cal Lab. Code §§ 1194, 1197) (ECF No. 43 ¶¶ 80–84)
(Count IV), and accurate wage statements (Cal. Lab. Code § 226) (ECF No. 43 ¶¶ 88–91)
(Count VI). 	Horanyi seeks liquidated damages (Cal. Lab. Code §§ 1194.2, 1197) (ECF
Case 3:24-cv-02251-BAS-MSB Document 115 Filed 01/14/26 PageID.<pageID>
Page 4 of 43

- 5 - 24cv2251
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
No. 43 ¶¶ 85–87) (Count V) for these violations (collectively, “wage and hour claims”).
Counter-Defendants counter that Horanyi is instead, exempt from wage and hour claims
under the California Labor Code. (ECF No. 57-1 at 11:6–14:2.)
California law provides an exemption from wage and hour claims for “executive”
employees who meet six criteria. To qualify as executive-exempt, an employee must: (1)
manage the enterprise, a customarily recognized department, or subdivision thereof; (2)
direct the work of two or more other employees; (3) have the authority to hire or fire, or
have their recommendations to hire, fire, or promote given weight; (4) exercise discretion
and independent judgment; (5) be primarily engaged in exempt duties; and (6) earn a
monthly salary equal to twice the state minimum wage for full-time employment. 	Cal.
Code Regs. tit. 8, § 11070(1)(A) (1)(a)-(f); see Casida v. Sears Holdings Corp., No. 1:11-
CV-01052 AWI, 2012 WL 3260423, at *7 (E.D. Cal. Aug. 8, 2012), 	report and
recommendation adopted, No. 1:11-CV-01052-AWI, 2012 WL 3763621 (E.D. Cal. Aug.
29, 2012); see also Whiteway v. FedEx Kinkos Off. & Print Servs., Inc., No. C 05-2320
SBA, 2010 WL 1980229, at *2 (N.D. Cal. May 17, 2010).
California law encourages the Court to be guided by the Fair Labor Standards Act
(“FLSA”) where California labor laws are unclear. See Nordquist v. McGraw-Hill Broad.
Co., 32 Cal. App. 4th 555, 562 (1995) (“Because the California wage and hour laws are
modeled to some extent on federal law, federal cases may provide persuasive guidance.”);
see also Chavez v. Converse, Inc., No. 15-CV-03746 NC, 2016 WL 4398374, at *2 (N.D.
Cal. Aug. 18, 2016). 	California labor law does not clearly define what constitutes a
“salary” or what it means to pay an employee on a salary basis for purposes of the
exemption. See Labor Code § 1182.12; IWC wage order No. 4-2001 (Cal. Code Regs., tit.
8, § 11040; Wage Order 4); see also Semprini v. Wedbush Sec., Inc., 57 Cal. App. 5th 246,
251 (2020).
Federal labor regulation, 29 C.F.R. § 541.602(a)(3), allows up to ten percent of the
salary amount required by § 541.600(a) of the Fair Labor Standards Act (FLSA) to be
satisfied “by payment of nondiscretionary bonuses, incentives and commissions, that are
Case 3:24-cv-02251-BAS-MSB Document 115 Filed 01/14/26 PageID.<pageID>
Page 5 of 43

- 6 - 24cv2251
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
paid annually or more frequently,” but employers “must pay the exempt executive,
administrative, or professional employee on a salary basis at least 90 percent . . . of the
standard salary level.” Semprini, 57 Cal. App. 5th at 252. In other words, nondiscretionary
bonuses and commissions cannot make up more than ten percent of an employee’s salary
for that employee to be exempt. See Walker v. Civility Mgmt. Sols., LLC, No. CV GLS-
21-2100, 2024 WL 4170015, at *11 (D. Md. Sept. 12, 2024) (finding that plaintiff was not
paid on salaried basis under FLSA exemption because over ten percent of plaintiff’s salary
comprised of bonus payments).
Additionally, to be exempt from federal labor protections in the FLSA, employees
must receive “a predetermined amount” of compensation that is “not subject to reduction
because of variations in the quality or quantity of the work performed” by the employee.
Bozzo v. City of Gilroy, 982 F. Supp. 2d 1057, 1059 (N.D. Cal. 2013). California courts
have further held that the “nondiscretionary bonus” counting towards an employee’s base
salary for purposes of the FLSA exemption must also not be subject to reduction based on
the quality or quantity of work performed. Semprini, 57 Cal. App. 5th at 252 (advances on
not-yet-earned commissions cannot constitute nondiscretionary bonuses that satisfy the
FLSA salary basis test).
The administrative exemption is an affirmative defense for which the defendant
bears the burden of proof. 	See Fleming v. Carpenters/Contractors Cooperation Comm.,
Inc., 834 F. Supp. 323, 325 (S.D. Cal. 1993); Service Employees Int'l Union, Local 102 v.
County of San Diego, 784 F.Supp. 1503, 1509 (S.D. Cal. 1992); Abshire v. County of Kern,
908 F.2d 483, 485–86 (9th Cir. 1990). The defendant employer must show that the plaintiff
employee fits plainly and unmistakably within (the exemption's) terms. Id.
Here, Horanyi clearly satisfies the first five factors of the executive employee
exemption test. 	The Counterclaim establishes that Horanyi served as NEO’s “managing
member,” overseeing more than 200 employees, had authority to recruit personnel, and
exercised independent judgment—including recommending that NEO join Luminate.
(ECF No. 43 ¶¶ 14, 18, 24, 25).
Case 3:24-cv-02251-BAS-MSB Document 115 Filed 01/14/26 PageID.<pageID>
Page 6 of 43

- 7 - 24cv2251
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
However, whether Horanyi satisfies the salary basis test in the last prong of the
executive employee exemption test is slightly murkier. The base salary Horanyi was paid
in 2023 was $62,400. (ECF No. 43 ¶ 39). To meet the salary test in the last prong listed
above, an employee must be paid a monthly salary that is at least twice the state minimum
wage for full-time employment. 	Cal. Lab. Code § 515(a). 	In 2023, employees were
entitled to be paid a minimum wage of at least $15.50 per hour. Cal. Lab. Code § 1182.12
(2023). 	Thus, the minimum salary for exempt employees in 2023 was $5,373.34 per
month (or $64,480.00 annually). 	Id. 	Horanyi’s 2023 base salary of $62,400, therefore,
does not subject him to the executive employee exemption.
Counter-Defendants contend instead, that pursuant to federal labor law, Horanyi
should be subject to the executive employee exemption since ten percent of Horanyi’s
bonus and his base salary add up to a total figure over double the minimum wage annual
salary. 	(ECF No. 57-1 at 13:22-26). 	However, Counter-Defendants misstate the ten
percent rule in the FLSA—which instead, calculates whether over ten percent of Horanyi’s
total salary is based upon nondiscretionary bonuses. 	Counter-Defendants state that
Horanyi has been paid nondiscretionary bonuses totaling $125,000 (ECF No. 57-1 at
13:25-26), which makes up nearly 67% Horanyi’s total salary—well over the ten percent
permitted by 29 C.F.R. § 541.602(a)(3). 	See Walker, 2024 WL 4170015, at *11 (finding
bonuses comprising of 41% of an employee’s salary to render that employee not subject to
FLSA’s exemption).
Even if Luminate had correctly applied the FLSA’s ten percent rule, the bonuses
Horanyi allegedly received are far from nondiscretionary. Luminate asserts that Horanyi’s
bonus payments are “keyed to the objective production volume” (ECF No. 82 at 9:8-12
(citing ECF No. 57-2 at 33-34), which implies that Horanyi’s compensation was subject to
reduction based on “variations in the . . . quantity of work performed.” See Bozzo, 982 F.
Supp. 2d at 1059.
Thus, for the reasons above, Counter-Defendants have failed to meet their burden at
this stage of proceedings to warrant dismissal of the wage and hour counterclaim that
Case 3:24-cv-02251-BAS-MSB Document 115 Filed 01/14/26 PageID.<pageID>
Page 7 of 43

- 8 - 24cv2251
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
Horanyi was paid an adequate base salary to qualify as an exempt employee under the
California Labor Code.
2. 	Meal and Rest Periods (Cal. Lab. Code §§ 226.7, 512)
As articulated by the Ninth Circuit in Landers v. Quality Communications, Inc.,
wage-and-hour claims need not include “detailed factual allegations,” but neither may they
consist solely of “conclusory allegations that merely recite the statutory language.” 771
F.3d 638, 644 (9th Cir. 2014). 	Although the claims in Landers were brought under the
federal Fair Labor Standards Act, courts regularly apply the same pleading standard to
claims brought in federal court under the California Labor Code. 	See, e.g., Haralson v.
United Airlines, Inc., 224 F. Supp. 3d 928, 942 (N.D. Cal. 2016); Ramirez v. HV Glob.
Mgmt. Corp., No. 21-cv-09955, 2022 WL 2132916, at *4 (N.D. Cal. June 14, 2022);
Wright v. Frontier Mgmt. LLC, No. 19-cv-01767, 2021 WL 2210739, at *2–3 (E.D. Cal.
June 1, 2021). 	To state a claim for failure to provide required meal or rest periods, a
plaintiff must allege either a specific corporate policy prohibiting those breaks or a specific
instance or instances in which he was denied a required break. 	See Ramirez, 2022 WL
2132916, at *4 (finding plaintiff's general allegations of working events without permission
to take a break insufficient under Landers); see also Verduzco v. French Art Network LLC,
No. 23-CV-00771-BLF, 2023 WL 4626934, at *2 (N.D. Cal. July 18, 2023) (finding
plaintiff’s recitation of statutory language, without specifying concrete instances of being
denied meal or rest breaks, to be insufficient to plead wage and hour claims under the
California Labor Code).
Here, Horanyi brings causes of action against Counter-Defendants for failing to meet
the meal period and rest period requirements set by the California Labor Code (Counts I
and II). (ECF No. 43 ¶¶ 64–74.) More specifically, Horanyi alleges that by misclassifying
him as a salary exempt employee, Counter-Defendants deprived him of meal breaks and
rest breaks. 	(Id. ¶¶ 40, 67, 68, 72.) Conspicuously missing from Horanyi’s allegations
are any specific instances in which Horanyi was actively denied any meal or rest breaks,
or how Counter-Defendants’ “misclassification” of Horanyi as a non-exempt employee
Case 3:24-cv-02251-BAS-MSB Document 115 Filed 01/14/26 PageID.<pageID>
Page 8 of 43

- 9 - 24cv2251
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
deprived Horanyi of meal and rest breaks or compensation thereof. See Ramirez, 2022 WL
2132916, at *4 (finding plaintiff's general allegations of working events without permission
to take a break insufficient under Landers). Merely alleging that Horanyi in fact, did not
take a one hour meal period or rest period daily is insufficient to demonstrate Counter-
Defendants deprived Horanyi of the opportunity to do so. 	Without identifying concrete
instances being denied a meal or rest break by Counter-Defendants or compensation for
such breaks, Horanyi’s allegations are too general for wage-and-hour claims under the
California Labor Code. See Verduzco, 2023 WL 4626934, at *2 (N.D. Cal. July 18, 2023)
(finding the same).
In addition, Horanyi fails to oppose Counter-Defendants’ motion to dismiss his meal
and rest period causes of action (Counts I and II), which alone is grounds for dismissal
without prejudice. See Kwan v. Wells Fargo Bank, N.A., No. 12CV1793-GPC MDD, 2013
WL 3831275, at *8 (S.D. Cal. July 23, 2013) (granting motion to dismiss breach of contract
claim without prejudice where plaintiff did not oppose motion to dismiss).
Thus, for the reasons above, the Court GRANTS Counter-Defendants’ motion to
dismiss (ECF No. 57) and DISMISSES WITHOUT PREJUDICE Horanyi’s meal and
rest period counterclaims (Counts I and II). (ECF No. 43.)
3. 	Overtime Wages and Minimum Wages (Cal. Labor Code §§ 510,
1194, 1197, 1198)
Under Landers, “[a]lthough plaintiffs . . . cannot be expected to allege ‘with
mathematical precision’ the amount of overtime compensation owed by the employer, they
should be able to allege facts demonstrating there was at least one workweek in which they
worked in excess of forty hours and were not paid overtime wages,” or in which they were
“not paid minimum wages.” 	771 F.3d at 1146. 	Overtime claims are insufficiently pled
where the complainant fails to include “basic factual allegations,” such as “what period of
time or type of conduct Plaintiffs are counting as hours worked,” that would permit the
court to conclude the claims were plausible. 	Tan v. GrubHub, Inc., 171 F. Supp. 3d 998,
1008 (N.D. Cal. 2016).
Case 3:24-cv-02251-BAS-MSB Document 115 Filed 01/14/26 PageID.<pageID>
Page 9 of 43

- 10 - 24cv2251
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
Here, Horanyi alleges that by misclassifying him as a salary exempt employee,
Luminate also deprived him of the opportunity to be compensated for working overtime
wages (Count III). (Id. ¶¶ 75–79.) Though Horanyi does state he regularly worked beyond
forty hours per week, he again fails to specify any particular week in which he worked in
excess of forty hours and was not paid overtime wages or minimum wages. See Tan, 171
F. Supp. 3d at 1008. 	Horanyi also fails to specify what tasks he performed during his
alleged overtime hours. See id.
Horanyi also asserts a cause of action for unpaid minimum wages for working
overtime hours for which he was not compensated (Count IV). (See ECF No. 43 ¶¶ 80–
84.) Insofar as Horanyi’s claim for unpaid minimum wages is founded upon his allegations
that he was not paid overtime wages, Horanyi’s minimum wage claim suffers from the
same defects as his overtime wages claim. 	See Rivera v. Jeld-Wen, Inc., No. 21-CV-
01816-AJB-AHG, 2022 WL 3702934, at *9 (S.D. Cal. Feb. 4, 2022) (dismissing Plaintiffs’
claim for failure to pay minimum wages where it “is derivative of Plaintiffs’ claim for
failure to pay overtime”); see also Perez v. DNC Parks & Resorts at Asilomar, Inc., 1:19-
cv-00484-DAD-SAB, 2022 WL 411422, at *6–7 (E.D. Cal. Feb. 10, 2022) (subjecting the
plaintiffs’ minimum wage claims to the same Landers standard as the plaintiffs’ overtime
wage claims and finding that they had not adequately alleged a workweek in which they
were not paid minimum wages).
For the reasons above, the Court GRANTS Counter-Defendants’ motion to dismiss
(ECF No. 57) and DISMISSES WITHOUT PREJUDICE Horanyi’s overtime and
minimum wage claims (Count III and IV) (ECF No. 43).
4. 	Liquidated Damages (Cal. Labor Code § 1194(2))
Section 1194.2 of the California Labor Code provides that “in any action . . . to
recover wages because of the payment of a wage less than the minimum wage fixed by an
order of the commission or by statute, an employee shall be entitled to recover liquidated
damages in an amount equal to the wages unlawfully unpaid and interest thereon.” Since
the Court has dismissed without prejudice Horanyi’s wage claims above, the Court
Case 3:24-cv-02251-BAS-MSB Document 115 Filed 01/14/26 PageID.<pageID>
Page 10 of 43

- 11 - 24cv2251
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
GRANTS 	Counter-Defendants’ motion to dismiss (ECF No. 57) and 	DISMISSES
WITHOUT PREJUDICE Horanyi’s claim for liquidated damages (Count V) (ECF No.
43).
6. 	Accurate Wage Statements (Cal. Labor Code § 226)
Accurate wage statement claims under California Labor Code § 226 that are
derivative of other Labor Code claims, including wage and hour claims, collapse as a
matter of law when those other claims are inadequately pled. 	See Ramirez, 2022 WL
2132916, at *4 (dismissing derivative wage statement and terminated/resigned employee
wage claims where predicate wage, meal period, and rest break claims were not adequately
pled); see also Verduzco, 2023 WL 4626934, at *3 (N.D. Cal. July 18, 2023).
Here, Horanyi’s counterclaim for accurate wage statements appears to be derivative
of his wage and hour counterclaims. (See ECF No. 43 ¶ 90 (requesting wage statements
for “accurate” information regarding net wages earned, applicable hourly rates, and total
number of hours worked at each rate).) 	Since Horanyi’s other California Labor Code
counterclaims are insufficiently pled, the Court also finds Horanyi has failed to plead a
claim for accurate wage statements.
Further, Lee fails to provide any detail regarding the inaccuracy of her own wage
statements. Courts have dismissed similarly vague claims. 	See e.g., Soratorio v. Tesoro
Ref. & Mktg. Co., LLC, No. CV171554MWFRAOX, 2017 WL 1520416, at *8 (C.D. Cal.
Apr. 26, 2017) (dismissing a Cal. Labor Code § 226 claim on grounds of vagueness where
plaintiff has failed to “allege a single factual exemplar of any inaccurate wage statement”).
For the reasons above, the Court GRANTS Counter-Defendants’ motion to dismiss
(ECF 	No. 	57) 	and 	DISMISSES 	WITHOUT 	PREJUDICE 	Counter-Plaintiff’s
counterclaim for accurate wage statements (Count VI).
7. 	Waiting Time Penalty (Cal. Labor Code § 203)
Pursuant to California Labor Code § 203, an employer is liable for penalties if it
“willfully fails to pay” wages owed to an employee at the time he or she is discharged or
Case 3:24-cv-02251-BAS-MSB Document 115 Filed 01/14/26 PageID.<pageID>
Page 11 of 43

- 12 - 24cv2251
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
quits. 	Cal. Lab. Code § 203(a); 	see also Wood v. N. Am. Van Lines, Inc., No.
820CV02092JLSADS, 2021 WL 3134203, at *6 (C.D. Cal. July 23, 2021).
Here, Counter-Plaintiffs’ waiting time claim is premised on the failure to pay
Horanyi for overtime, meal periods, and rest periods. (ECF No. 43 at ¶¶ 92–98.) Because
the Court dismissed these claims, Horanyi also fails to state a claim for waiting time
penalties. See Velasco v. Elliot, No. 18-CV-03191-VKD, 2018 WL 6069009, at *6 (N.D.
Cal. Nov. 20, 2018) (“Because [Plaintiff's] fifth and sixth claims for waiting time penalties
and unfair business practices are derivative of his overtime and minimum wage claims, he
has also failed to state a claim for those violations.”)
Further, Lee fails to provide any detail regarding the amount or nature of unpaid
wages—and thus, does not adequately allege a waiting period claim to survive the motion
to dismiss stage. Courts have dismissed similarly vague claims. For example in Lopez v.
Aerotek, Inc., the plaintiff alleged only that “Defendants willfully failed to pay their
workers accrued wages due promptly upon separation, as required by [the California Labor
Code].” 2015 WL 4504691, at *2 (C.D. Cal. July 23, 2015). The court dismissed the claim
after noting that “Plaintiff does not even generally allege what wages were earned and paid
at the time of termination, nor does she allege how and in what manner any final wage
payment was untimely under the Labor Code.” Id; see also Soratorio, 2017 WL 1520416,
at *7 (C.D. Cal. Apr. 26, 2017) (dismissing plaintiff’s Cal. Lab. Code § 203 claim for
failing to allege exactly what wages were earned and unpaid).
For the reasons above, the Court GRANTS Counter-Defendants’ motion to dismiss
(ECF 	No. 	57) 	and 	DISMISSES 	WITHOUT 	PREJUDICE 	Counter-Plaintiff’s
counterclaim for waiting time penalties under Cal. Lab. Code § 203 (Count VII) (ECF No.
43).
8. 	Failure to Reimburse Expenses & Losses (Cal. Labor Code § 2802)
Section 2802 of the California Labor Code requires employers to indemnify
“employee[s] for all necessary expenditures or losses incurred by the employee[s] in direct
consequence of the discharge of [their] duties ....” Cal. Lab. Code § 2802. There are three
Case 3:24-cv-02251-BAS-MSB Document 115 Filed 01/14/26 PageID.<pageID>
Page 12 of 43

- 13 - 24cv2251
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
elements to a claim under Cal. Lab. Code § 2802: “(i) the employee made expenditures or
incurred losses; (ii) the expenditures or losses were incurred in direct consequence of the
employee's discharge of his or her duties, or obedience to the directions of the employer;
and (iii) the expenditures or losses were reasonable and necessary.” Perez v. Island Hosp.
Mgmt. III, LLC, No. CV-18-4903-DMG-JPRx, 2019 WL 3064113, at *7 (C.D. Cal. Feb.
8, 2019) (quoting Gattuso v. Harte-Hanks Shoppers, 42 Cal. 4th 554, 568 (2007)).
Here, Counter-Plaintiffs do not sufficiently allege a cause of action for failure to
indemnify for expenditures or losses in violation of Section 2802 of the California Labor
Code. (See ECF No. 43 ¶¶ 99–104.) 	Though Counter-Plaintiffs assert they incurred
expenses related to their duties including “costs related to travel, communication,
equipment, supplies,” they do not elaborate upon what travel they engaged in or what other
personal 	costs 	they 	incurred 	to 	perform 	their 	duties. 	See 	e.g., 	Paulk 	v. 	Student
Transportation of Am., Inc., No. CV 24-3436-JFW(JPRX), 2024 WL 4868272, at *3 (C.D.
Cal. July 25, 2024) (asserting out-of-pocket expenses for using personal cell phone to
perform job duties is sufficient for a Cal. Lab. Code § 2802 claim to survive the motion to
dismiss stage). 	Even if Counter-Plaintiffs sufficiently alleged losses or expenditures
incurred, they failed to allege those losses or expenditures were reasonable and necessary
for them to conduct their job duties at Luminate. Perez, 2019 WL 3064113, at *7.
Thus, the Court GRANTS Counter-Defendants’ motion to dismiss (ECF No. 57)
and DISMISSES WITHOUT PREJUDICE Counter-Plaintiff’s counterclaim for waiting
time penalties under the California Labor Code (Count VIII) (ECF No. 43).
9. 	Forum Selection Clause, Cal. Lab. Code § 925
Counter-Plaintiffs argue that Counter-Defendants required Counter-Plaintiffs to sign
unlawful employment agreements that include: (1) forum selection clauses for disputes
arising from the agreement requiring adjudication in Minnesota, and (2) non-compete
provisions. (ECF No. 43 ¶¶ 27, 111.) Counter-Plaintiffs assert that these clauses violate
Cal. Lab. Code §§ 432.5, 925; and Cal. Bus. & Prof. Code §§ 16600, 16600.5 (Count IX).
Cal. Lab. Code § 925 provides:
Case 3:24-cv-02251-BAS-MSB Document 115 Filed 01/14/26 PageID.<pageID>
Page 13 of 43

- 14 - 24cv2251
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
(a) An employer shall not require an employee who primarily resides
and works in California, as a condition of employment, to agree to a
provision that would do either of the following:
(1) Require the employee to adjudicate outside of California a
claim arising in California.
(2) Deprive the employee of the substantive protection of
California law with respect to a controversy arising in California.
District courts have determined that § 925 expresses California's strong public policy
against forum-selection clauses in employment agreements. 	See e.g., Campbell v. FAF,
Inc., No. 19-CV-142-WQH-BLM, 2019 WL 2574119, at *5 (S.D. Cal. June 20, 2019). As
a limiting principle, § 925’s public policy involves only employees who primarily reside
and work in California during the time of employment. 	Walters v. Famous Transports,
Inc., 488 F. Supp. 3d 930, 937 (N.D. Cal. 2020) (evaluating the enforceability of forum
selection clause) (quoting Cal. Lab. Code § 925). 	Further, for § 925 to apply to void an
employment contract, that contract must be a “condition of employment.” 	See Eller v.
Automatic Data Processing, Inc., No. 23-CV-0943-BAS-AHG, 2023 WL 3829723, at *5
(S.D. Cal. June 5, 2023).
Here, Counter-Plaintiffs allege that they resided and worked in California while
employed at Luminate. (ECF No. 43 ¶ 110.) Counter-Plaintiffs have also alleged Luminate
required them to sign agreements “governed by Minnesota law.” (Id. ¶ 111.) However,
Counter-Plaintiffs fail to provide any contractual language specifying that their agreements
with Luminate should be governed by Minnesota law, or that those agreements were a
condition of Counter-Plaintiffs’ employment with Luminate. 	See Walters, 488 F. Supp.
3d at 937; Eller, 2023 WL 3829723, at *5; cf Garcia v. TriStruX LLC, No. 2:23-CV-08726-
SVW-SSC, 2024 WL 4867234, at *6 (C.D. Cal. Sept. 18, 2024) (finding a contract stating
that New Jersey law should apply “to the fullest extent permitted by law” did not violate
Cal. Lab. Code § 925, since it does not prevent California law from applying to the dispute).
When a dispute relies upon contract interpretation, vague assertions of contractual duties
are not enough because “[t]o the extent plaintiffs rely on a written contract, plaintiffs must
Case 3:24-cv-02251-BAS-MSB Document 115 Filed 01/14/26 PageID.<pageID>
Page 14 of 43

- 15 - 24cv2251
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
attach the written contract or plead its terms verbatim.” 	Altman v. PNC Mortg., 850 F.
Supp. 2d 1057, 1079 (E.D. Cal. 2012).
Thus, the Court GRANTS Counter-Defendants’ motion to dismiss (ECF No. 57)
and DENIES WITHOUT PREJUDICE Counter-Plaintiffs’ claim for violation of Cal.
Lab. Code § 925 (Count IX) (ECF No. 43).
10. 	Employment Agreement Conditions, Cal. Lab. Code § 432.5
Cal. Lab. Code § 432.5 states that no employer shall require any employee to agree
to any term or condition which is known to be prohibited by law. 	To adequately state a
claim for a violation of these sections, a plaintiff must allege that (1) an employer/employee
relationship existed at the time of the alleged conduct and (2) that the employer required
the employee to sign an objectionable release because it was required for the employee to
receive wages owed or because the release was prohibited by law. 	Smith v. Level 3
Commc'ns Inc., No. C 14-05036 WHA, 2014 WL 7463803, at *2 (N.D. Cal. Dec. 30, 2014).
Cal. 	Bus. 	& 	Prof. 	Code 	§ 	16600 	has 	“specifically 	been 	held 	to 	invalidate
employment contracts which prohibit an employee from working for a competitor when
the employment has terminated,” subject to a few exceptions such as when noncompete
provisions are necessary to protect an employer’s trade secrets. 	See Application Group,
Inc. v. Hunter Group, Inc., 61 Cal.App.4th 881, 900 (1998). 	Cal. Bus. & Prof. Code §
16600.5 provides remedies of injunctive relief and actual damages for contracts with
voidable noncompete provisions.
Here, Counter-Plaintiffs assert: “Section 432.5 [of the California Labor Code]
applies to unenforceable non-compete and non-solicitation provisions, which violate
California’s 	strong 	public 	policy 	favoring 	employee 	mobility 	under 	Business 	and
Professions Code § 16600.” (ECF No. 43 ¶ 107.) Courts have ruled against interpreting
Cal. Lab. Code § 432.5 and Cal. Bus. & Prof. Code § 16600 together, however, finding
that the “plain language of Labor Code § 432.5 appears to apply only to contracts that are
specifically declared unlawful.” Beebe v. Mobility, Inc., 2008 WL 474391, at *3 (S.D. Cal.
Feb. 20, 2008) (granting motion to dismiss a claim under § 432.5 where the underlying
Case 3:24-cv-02251-BAS-MSB Document 115 Filed 01/14/26 PageID.<pageID>
Page 15 of 43

- 16 - 24cv2251
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
term was void but not unlawful). 	“Thus, under Beebe, Section 16600 cannot be the
predicate for a Labor Code section 432.5 violation because Section 16600 makes the
provision void rather than prohibited by law.” Hamilton v. Juul Labs, 2020 WL 5500377,
at *7 (N.D. Cal. Sept. 11, 2020).
Since an alleged Cal. Bus. & Prof. Code § 16600 violation is at the bedrock of
Counter-Plaintiffs’ 	Cal. 	Lab. 	Code 	§ 	432.5 	claim, 	the 	Court 	GRANTS 	Counter-
Defendants’ motion to dismiss (ECF No. 57) and DISMISSES WITHOUT PREJUDICE
Counter-Plaintiffs’ Cal. Lab. Code § 432.5 claim (Count IX) (ECF No. 43).
11. 	Noncompete Clauses in Employment Agreements, Cal. Bus. &
Prof. Code §§ 16600, 16600.5 et. seq.
As discussed, Cal. Bus. & Prof. Code § 16600 has “specifically been held to
invalidate 	employment 	contracts 	which 	prohibit 	an 	employee 	from 	working 	for 	a
competitor when the employment has terminated.” See Application Group, Inc. v. Hunter
Group, Inc., 61 Cal.App.4th 881, 900 (1998). Cal. Bus. & Prof. Code § 16600.5 states that
a “former employer shall not attempt to enforce” a non-compete contract that is void. DER
Sec. Corp v. Enetrics LLC, No. 25-CV-00764-VC, 2025 WL 1993638, at *1 (N.D. Cal.
July 17, 2025).
Counter-Plaintiffs allege that Counter-Defendants required Counter-Plaintiffs to
sign contracts, “some” of which contain non-compete provisions. (ECF No. 43 ¶¶ 27, 111.)
In particular, Horanyi asserts he signed a contract containing the following employment
provision, Section 5.8 of the Non-Producing Division President Employment Agreement
(id. ¶ 28):
Employee agrees that for a period of twelve (12) months following the
cessation of employment with the Company for any reason (such period not
to include any period(s) of violation or period(s) of time required for litigation
to enforce the covenants herein) he/she will not directly or indirectly, on
behalf of himself/herself or any other individual, organization, or entity,
solicit for the purpose of providing services of the type provided by the
Company (i) any actual customer or client of the Company; (ii) any loans in
process with the Company at the time of Employee’s separation from the
Case 3:24-cv-02251-BAS-MSB Document 115 Filed 01/14/26 PageID.<pageID>
Page 16 of 43

- 17 - 24cv2251
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
Company; (iii) any actual or prospective customer or client generated by
Company-driven efforts, including Company’s corporate marketing efforts,
preferred company relationships and call center operations; and/or (iv) any
actual or prospective customer or client not generated by the Employee’s own
marketing efforts or referral sources.
The contract provision above appears to “prohibit [Horanyi] from working for a
competitor when the employment has terminated” without being accompanied by any of
the enumerated exceptions in Cal. Bus. & Prof. Code § 16600.5 (Count IX). 	See
Application Group, Inc. v. Hunter Group, Inc., 61 Cal.App.4th 881, 900 (1998). Further,
Counter-Plaintiffs have not alleged that any of the enumerated exceptions allowing non-
compete agreements in California apply to the agreement above. Accordingly, the Court
DENIES Counter-Defendants’ motion to dismiss Horanyi’s Cal. Bus. & Prof. Code §
16600.5 counterclaim to void the cited noncompete clause quoted above (Count IX) (ECF
No. 43).
However, unlike Horanyi, Lee does not cite, paraphrase or reference any specific
non-compete provision that she was required to sign as a condition of her employment with
Luminate. Again, when a dispute relies upon contract interpretation, vague assertions of
contractual duties are not enough because “[t]o the extent plaintiffs rely on a written
contract, plaintiffs must attach the written contract or plead its terms verbatim.” 	Altman,
850 F. Supp. 2d at 1079. There is no allegation that Lee signed the same contract or terms
as Horanyi.
Thus, the Court GRANTS Counter-Defendants’ motion to dismiss (ECF No. 57)
and DISMISSES WITHOUT PREJUDICE Lee’s Cal. Bus. & Prof. Code §§ 16600,
16600.5 claims (Count IX) (ECF No. 43).
B. 	Wrongful Termination (Gov’t Code §12940 et. seq.)
“To state a claim for wrongful termination in violation of public policy, a plaintiff
must demonstrate that: (1) he was terminated; and (2) his dismissal violated a policy that
is fundamental, beneficial for the public, and embodied in a statute or constitutional
provision.” See Cervantes v. Transdev Servs., Inc., No. 320CV02528AJBKSC, 2021 WL
Case 3:24-cv-02251-BAS-MSB Document 115 Filed 01/14/26 PageID.<pageID>
Page 17 of 43

- 18 - 24cv2251
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
5513512, at *9 (S.D. Cal. Oct. 4, 2021); Jaffe v. Sedgwick Claims Mgmt. Servs., Inc., No.
2:17-cv-03421-ODW (Ex), 2017 WL 3160561, at *4 (C.D. Cal. July 24, 2017) (citing
Turner v. Anheuser-Busch, Inc., 7 Cal. 4th 1238, 1256, 876 P.2d 1022, 1032–33 (1994)).
A plaintiff may pursue such a claim if the employer terminated the plaintiff for: (1) refusing
to violate a statute; (2) performing a statutory obligation; (3) exercising a statutory right or
privilege; or (4) reporting an alleged violation of a statute of public importance. See Gantt
v. Sentry Ins., 1 Cal.4th 1083, 1090-91 (1992). 	The public policy violated must be
fundamental, substantial, and well-established at the time of the discharge, and it must be
rooted in some constitutional or statutory provision. Id. at 1090, 1095.
Here, Counter-Plaintiffs appear to allege that Counter-Defendants terminated
Counter-Plaintiffs’ employment for “exercising a statutory right or privilege,” see Gantt v.
Sentry Ins., 1 Cal.4th at 1090-91, including “seeking lawful alternative employment
opportunities” (ECF No. 43 ¶ 114). Counter-Plaintiffs further assert that the terminations
were “conducted in bad faith and with malicious intent to punish the Counter-Plaintiffs”
and were “designed and conducted in such a way to harm the Counter-Plaintiffs’
reputations and career prospects by disseminating false allegations of misconduct and
unethical behavior.” (Id. ¶ 116). However, Counter-Plaintiffs fail to make any allegations
that Luminate terminated their employment with the intent to prevent Counter-Plaintiffs
from seeking future employment. While “detailed factual allegations” are unnecessary, a
complaint must allege more than “[t]hreadbare recitals of the elements of a cause of action,
supported by mere conclusory statements” to survive a motion to dismiss. 	In re Outlaw
Lab'y, LLP, 463 F. Supp. 3d 1068, 1079 (S.D. Cal. 2020) (citing Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009)).
For the reasons above, the Court GRANTS Counter-Defendants’ motion to dismiss
(ECF No. 57) and DISMISSES WITHOUT PREJUDICE Counter-Plaintiffs’ wrongful
termination claim (Count X) (ECF No. 43).
C. 	California Anti-SLAPP Statute (Cal. Civ. Proc. Code § 425.16)
Case 3:24-cv-02251-BAS-MSB Document 115 Filed 01/14/26 PageID.<pageID>
Page 18 of 43

- 19 - 24cv2251
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
The California Legislature enacted the anti-SLAPP statute, California Code of Civil
Procedure Section 425.16, in 1992 to curtail the “disturbing increase in lawsuits brought
primarily to chill the valid exercise of the constitutional rights of freedom of speech and
petition for the redress of grievances.” Cal. Civ. Proc. Code § 425.16(a); Bull. Displays,
LLC v. Regency Outdoor Advert., Inc., 448 F. Supp. 2d 1172, 1178–79 (C.D. Cal. 2006).
The anti-SLAPP statute “was enacted to allow early dismissal of meritless first amendment
cases aimed at chilling expression through costly, time-consuming litigation.” Metabolife
Int'l, Inc. v. Wornick, 264 F.3d 832, 839 (9th Cir. 2001); see also Wilcox v. Superior Ct.,
27 Cal.App.4th 809, 816 (1994).
California's anti-SLAPP statute permits a defendant to file a “special motion to
strike” to dismiss an action before trial. Cal. Civ. Proc. Code § 425.16.1 Motions brought
under the anti-SLAPP statute are evaluated in two steps. 	Chin v. Evergreen Freedom
Found., 764 F. Supp. 3d 924, 928–29 (C.D. Cal. 2025). First, “the moving defendant must
make a prima facie showing that the plaintiff's suit arises from an act in furtherance of the
defendant's constitutional right to free speech.” 	Id. (citing Makaeff v. Trump Univ., LLC,
715 F.3d 254, 261 (9th Cir. 2013)). 	Second, “[t]he burden then shifts to the plaintiff ... to
establish a reasonable probability that it will prevail on its claim in order for that claim to
survive dismissal.” 	Id. 	“The plaintiff must demonstrate that ‘the complaint is legally
sufficient and supported by a prima facie showing of facts to sustain a favorable judgment
if the evidence submitted by plaintiff is credited.’” 	Metabolife, 264 F.3d at 840 (quoting
Wilcox, 27 Cal.App.4th at 823).
1. 	Step One of anti-SLAPP Analysis
In applying the first step of the anti-SLAPP analysis, “the critical point is whether
the plaintiff's cause of action itself was based on an act in furtherance of the defendant's
right of petition or free speech.” 	City of Cotati v. Cashman, 29 Cal. 4th 69, 78 (2002).
1 District courts within California have permitted defendants to move to strike under Cal. Civ.
Proc. Code § 425.16 and Rule 12(b)(6) in the same motion—as Luminate does here. See e.g., Youngevity
Int'l Corp. v. Smith, No. 16-CV-0704 W (JLB), 2016 WL 7626582, at *1 (S.D. Cal. June 29, 2016).
Case 3:24-cv-02251-BAS-MSB Document 115 Filed 01/14/26 PageID.<pageID>
Page 19 of 43

- 20 - 24cv2251
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
Under California Code of Civil Procedure § 425.16(e), an act qualifies as protected activity
if, inter alia, it constitutes “any written or oral statement or writing made before a . . .
judicial proceeding” or “under consideration or review by a . . . judicial body.” 	See Cal.
Civ. Proc. Code § 425.16(e)(1)-(2). Statements made in litigation, or in connection with
litigation, are protected by the anti-SLAPP statute. 	See Diamond Resorts U.S. Collection
Dev., LLC v. Pandora Mktg., LLC, 541 F. Supp. 3d 1020, 1025 (C.D. Cal. 2021) (citing
Briggs v. Eden Council for Hope & Opportunity, 19 Cal. 4th 1106, 1115 (1999)).
Here, Counter-Defendants move to strike Counter-Plaintiffs’ claims for defamation
(Count XI) and tortious interference with prospective economic advantage (Count XII)
pursuant to California’s anti-SLAPP statute, Cal. Civ. Proc. Code § 425.16, alleging they
are premised entirely upon “false litigation claims” and “use of the judicial system” (ECF
No. 57-1 at 8:25–9:1)—including statements made by Counter-Defendants in their
pleadings in this action (id. at 9:11-21).
i. 	Defamation
First, Counter-Plaintiffs assert that Counter-Defendants’ claims in their complaint
are 	defamatory, 	including: 	(1) 	Counter-Plaintiffs 	unlawfully 	shared 	proprietary
information with Better, and (2) Horanyi violated non-solicitation obligations in an
agreement with Counter-Defendants. 	(ECF No. 57 ¶¶ 47–49.) 	If these were the only
statements Counter-Plaintiffs asserted to substantiate their cause of action for defamation,
their entire cause of action would likely be barred by the anti-SLAPP statute, Cal. Civ.
Proc. Code § 425.16. 	However, also as part of their claim for defamation, Counter-
Plaintiffs further assert that: (1) Counter-Defendants told multiple third parties that
Counter-Plaintiffs had acted unlawfully and unethically, (2) Counter-Defendants told
industry executives at a conference in Texas that Horanyi had been a “cancer” to be excised
from Luminate, and (3) Counter-Defendants told NEO employees in Florida that NEO
(including Horanyi) had lied to these employees about how much was being collected on
loans and had therefore stolen parts of payments that belonged to the employees. 	(ECF
No. 57 ¶¶ 50, 51, 53.) 	Unlike Counter-Defendants’ statements in their complaint, these
Case 3:24-cv-02251-BAS-MSB Document 115 Filed 01/14/26 PageID.<pageID>
Page 20 of 43

- 21 - 24cv2251
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
latter alleged statements did not take place in anticipation of or as part of any legal
proceeding.
California courts have held that “an anti-SLAPP motion may strike distinct claims
within a cause of action, even if the entire cause of action is not subject to anti-SLAPP.”
Jordan-Benel v. Universal City Studios, Inc., 859 F.3d 1184, 1189 n.4 (9th Cir. 2017)
(citing Baral v. Schnitt, 1 Cal. 5th 376, 382 (2006) (holding that mixed-claims are subject
to the special motion to strike to the extent they are supported by allegations consisting of
protected conduct)). 	As such, the Court strikes only Counter-Plaintiffs’ claims that
Counter-Defendants’ statements in their complaint are defamatory. 	Counter-Plaintiffs’
other claims to support their cause of action for defamation proceed to step two of the anti-
SLAPP analysis.
ii. 	Tortious Interference
Unlike Counter-Plaintiffs’ 	cause of 	action 	for defamation, claims 	supporting
Counter-Plaintiffs’ cause of action for tortious interference are based entirely upon anti-
SLAPP protected speech. 	Counter-Plaintiffs assert that Counter-Defendants tortiously
interfered with Counter-Plaintiffs’ “existing and prospective economic relationships with
Better Mortgage Co. [and] other potential employers or partners” by “issuing baseless legal
threats against Better Mortgage Co. and other third parties to discourage collaboration” and
“us[ing] the judicial system to punish Counter-Plaintiffs.” 	(ECF No. 57 ¶¶ 129–132.)
Since these “legal threats” are all related to Counter-Defendants’ protected use of the
judicial system to bring cases to court, Counter-Plaintiffs’ cause of action for tortious
interference is barred by step one of the anti-SLAPP analysis. See Diamond Resorts U.S.
Collection Dev., LLC, 541 F. Supp. 3d at 1025 (finding statements made in litigation, or in
connection with litigation, are protected by the anti-SLAPP statute).
2. 	Step Two of anti-SLAPP Analysis
Under the second step of the anti-SLAPP framework, Counter-Plaintiffs bear the
burden of demonstrating a probability of prevailing on the merits of their claims. “[W]hen
an anti-SLAPP motion to strike challenges only the legal sufficiency of a claim, a district
Case 3:24-cv-02251-BAS-MSB Document 115 Filed 01/14/26 PageID.<pageID>
Page 21 of 43

- 22 - 24cv2251
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
court should apply the Rule 12(b)(6) standard and consider whether a claim is properly
stated.” 	Planned Parenthood Fed'n of Am., Inc. v. Ctr. for Med. Progress, 890 F.3d 828,
834 (9th Cir. 2018). 	There is no dispute that the anti-SLAPP motion targets the legal
sufficiency of Plaintiffs’ claims. Therefore, Counter-Plaintiffs’ claims are analyzed under
a 12(b)(6) standard.
Since the claims involving threats of litigation and during litigation are barred by
step one of the anti-SLAPP analysis, supra § III.C.1, the Court only considers whether
Counter-Plaintiffs’ claims that Counter-Defendants’ statements taking place outside of
court are sufficient to state a claim under Rule 12(b)(6) for defamation.
To assert a prima facie case for defamation in California, Counter-Plaintiffs need to
allege: (1) “the intentional publication” of (2) “a statement of fact” that (3) is “false” (4)
“unprivileged,” and (5) “has a natural tendency to injure or which causes special damage.”
Smith v. Maldonado, 72 Cal.App.4th 637, 645 (1999).
First, Counter-Defendants’ alleged statement that Horanyi had been a “cancer” to be
excised from Luminate, ECF No. 43 ¶ 51, constitutes a metaphoric statement of opinion
rather than fact, since a person cannot literally be cancer. 	“It is an essential element of
defamation that the publication be of a false statement of fact rather than opinion.” Ringler
Assocs. Inc. v. Maryland Cas. Co., 80 Cal. App. 4th 1165, 1181 (2000). 	“Because the
statement must contain a provable falsehood, courts distinguish between statements of fact
and statements of opinion for purposes of defamation liability.” 	Dickinson v. Cosby, 17
Cal. App. 5th 655, 685 (2017). Thus, rhetorical hyperbole, vigorous epithet[s], lusty and
imaginative expression[s] of . . . contempt, and language used in a loose, figurative sense
have all been accorded constitutional protection.” Seelig v. Infinity Broad. Corp., 97 Cal.
App. 4th 798, 809, 119 Cal.Rptr.2d 108 (2002). As such, Counter-Defendants’ statement
referring to Horanyi as “cancer” cannot provide the basis for a prima facie claim of
defamation.
Second, Counter-Defendants’ alleged statement that Counter-Plaintiffs had acted
“unlawfully and unethically,” ECF No. 43 ¶ 50, constitutes a “‘broad, unfocused and
Case 3:24-cv-02251-BAS-MSB Document 115 Filed 01/14/26 PageID.<pageID>
Page 22 of 43

- 23 - 24cv2251
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
wholly subjective comment,’ ” such as stating that “plaintiff was a ‘shady practitioner’,
‘crook’, or ‘crooked politician’.” 	Copp v. Paxton, 45 Cal. App. 4th 829, 837 (1996).
Without providing any additional detail as to the contents of Counter-Defendants’
statements, the Court cannot discern whether Counter-Defendants’ statements were
instead, “factually specific,” “earnest” and “‘serious’ in tone.” 	Bowles v. Constellation
Brands, Inc., 444 F. Supp. 3d 1161, 1175 (E.D. Cal. 2020) (citing ZL Techs., Inc. v. Does
1-7, 13 Cal. App. 5th 603, 624 (2017)). As such, the Court finds that Counter-Defendants’
alleged statement that Counter-Plaintiffs had acted “unlawfully and unethically” is not
specific enough to plead a defamation claim at the motion to dismiss stage. See id; see also
Rule 12(b)(6).
Third, Counter-Defendants’ alleged statement to NEO employees in Florida that
Counter-Plaintiffs had “lied to these employees about how much was being collected on
loans and had therefore stolen parts of payments that belonged to the employees,” ECF No.
57 ¶ 53 is a statement of fact (unlike the two preceding statements). See Maldonado, at 72
Cal.App.4th 	at 	645. 	Additionally, 	Counter-Plaintiffs 	have 	alleged 	that 	Counter-
Defendants’ statements were intentionally “published” (i.e., made to independent third
parties, the Florida NEO employees) and can injure Counter-Plaintiffs’ prospective
business relationships with these third parties going forward (ECF No. 57 ¶ 53). 	See
Maldonado, at 72 Cal.App.4th at 645. Thus, regarding Counter-Defendants’ statement to
NEO employees in Florida, Counter-Plaintiffs sufficiently alleged a claim for defamation.
Counter-Defendants’ statement to NEO’s Florida employees could be subject to
privilege if made in the context of explaining Counter-Defendants’ decision to terminate
Horanyi’s and/or Lee’s employment. 	See King v. United Parcel Service, Inc., 152
Cal.App.4th 426, 440 (2007) (“[B]ecause an employer and its employees have a common
interest in protecting the workplace from abuse, an employer's statements to employees
regarding the reasons for termination of another employee generally” are made without
malice and are privileged); see also Carver v. Bonds, 135 Cal. App. 4th 328, 343 (2005)
(“A statement as to why an employee was terminated [is] protected under subdivision (e)(4)
Case 3:24-cv-02251-BAS-MSB Document 115 Filed 01/14/26 PageID.<pageID>
Page 23 of 43

- 24 - 24cv2251
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
[of California’s Anti-SLAPP law]”); see also McGrory v. Applied Signal Technology, Inc.
(2013) 212 Cal.App.4th 1510, 1538 (a statement is made on a privileged occasion when it
is a “statement[ ] by management and coworkers to other coworkers explaining why an
employer disciplined an employee”). 	However, Counter-Plaintiffs have not alleged that
Counter-Defendants’ statement to NEO’s Florida employees was made in the context of
explaining why Horanyi and Lee were terminated—or any other reason that the statement
was privileged. As such, the Court finds that Counter-Plaintiffs have adequately alleged a
claim 	for 	defamation 	regarding 	Counter-Defendants’ 	statement 	to 	NEO’s 	Florida
employees.
* * *
In sum, the Court GRANTS Counter-Defendants’ motion to dismiss (ECF No. 57)
Counter-Plaintiffs’ cause of action for tortious interference (Count XII) and Counter-
Plaintiffs’ defamation claims regarding Counter-Defendants’ alleged statements that: (1)
Counter-Plaintiffs unlawfully shared proprietary information with Better, (2) Horanyi had
violated 	non-solicitation 	obligations 	in 	an 	agreement 	with 	Counter-Defendants, (3)
Horanyi is “cancer” (ECF No. 43 ¶ 51), and (4) that Counter-Plaintiffs acted “unlawfully
and unethically” (id. ¶ 50) (Count XI). 	These claims are DISMISSED WITHOUT
PREJUDICE.
By contrast, the Court DENIES Counter-Defendants’ motion to dismiss Counter-
Defendants’ allegedly defamatory statement to NEO’s Florida employees (id. ¶ 53) (Count
XI).
D. 	Breach of Contract
In California, a party asserting a breach of contract claim must plead “(1) the
contract, (2) plaintiff's performance or excuse for non-performance, (3) defendant's breach,
and (4) damage to plaintiff therefrom.” 	Acoustics, Inc. v. Trepte Constr. Co., 	14
Cal.App.3d 887, 913 (Ct. App. 1971).
Here, Counter-Plaintiffs bring a cause of action for breach of contract (Count XIII)
against Counter-Defendants for violating “express and implied agreements,” including
Case 3:24-cv-02251-BAS-MSB Document 115 Filed 01/14/26 PageID.<pageID>
Page 24 of 43

- 25 - 24cv2251
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
violating terms related to: (1) payment for all work performed, (2) promises ensuring
NEO’s operational autonomy and intellectual property rights, and (3) commitments to
provide adequate operational support to enable the Counter-Plaintiff’s to perform their
duties effectively.” (ECF No. 43 ¶ 134.) The only contract provision Counter-Plaintiffs
explicitly cite is Section 5.8 of the Non-Producing Division President Employment
Agreement. (Id. ¶ 135.)
First, since Counter-Plaintiffs allege that Section 5.8 of the Non-Producing Division
President Employment Agreement (“Section 5.8”) relates to Horanyi and not Lee, the
Court dismisses Lee’s breach of contract claims for failure to cite a violation of specific
contractual provision. See In re Anthem, Inc. Data Breach Litig., 162 F. Supp. 3d 953, 979
(N.D. Cal. 2016) (Without “refer[ring] to any contractual language or any contractual
provisions that [Defendant] allegedly breached . . . Plaintiffs' conclusory statements ... are
insufficient to survive a motion to dismiss.”); see also Young v. Facebook, Inc., 790 F.
Supp. 2d 1110, 1117 (N.D. Cal. 2011) (“In an action for breach of a written contract, a
plaintiff must allege the specific provisions in the contract creating the obligation the
defendant is said to have breached.”).
Second, since Counter-Plaintiffs do not allege that Section 5.8 relates to payments
or operational support, the Court dismisses Counter-Plaintiffs’ claims for breach of
contract 	regarding 	Counter-Defendants’ failure 	to 	provide payments 	or 	operational
support. See In re Anthem, Inc. Data Breach Litig., 162 F. Supp. 3d at 979; see also Young,
790 F. Supp. 2d at 1117.
Third, Counter-Plaintiffs have not provided adequate detail regarding the scope of
NEO’s alleged intellectual property rights and “operational autonomy” afforded by Section
5.8. 	Accordingly, the Court finds Counter-Plaintiffs have insufficiently pled claims for
breach of contract regarding NEO’s intellectual property rights and operational autonomy.
See e.g., GeoData Sys. Mgmt., Inc. v. Am. Pac. Plastic Fabricators, Inc., No. CV 15-04125
MMM (JEMX), 2015 WL 12731920, at *16 (C.D. Cal. Sept. 21, 2015) (dismissing breach
of contract claims where plaintiff failed to allege “sufficient intelligible facts that the court
Case 3:24-cv-02251-BAS-MSB Document 115 Filed 01/14/26 PageID.<pageID>
Page 25 of 43

- 26 - 24cv2251
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
or defendants can discern the contract terms relating to the intellectual property or the
contractual obligation [defendant] allegedly breached”).
Fourth, Counter-Plaintiffs allege that Section 5.8 permitted Horanyi to solicit NEO
employees without violating any “restrictive covenants” within Luminate’s structure. Yet,
Counter-Plaintiffs have failed to describe any actions expressly prohibited by Section 5.8
that Counter-Defendants have taken to restrict Horanyi’s solicitation of NEO employees.
Without adequately describing Counter-Defendants’ violative conduct, the Court finds
Horanyi has failed to plead Counter-Defendants’ breach of any contractual obligation to
permit Horanyi to solicit NEO employees to work at Better. 	See e.g., Jackson v. Rhino
Ent. Co., No. CV1601668BROPJWX, 2016 WL 11002546, at *5 (C.D. Cal. Nov. 10, 2016)
(dismissing breach of contract claim where plaintiff failed to provide facts regarding
defendant’s specific failures to pay royalties).
For the reasons above, the Court GRANTS Counter-Defendants’ motion (ECF No.
57) and DISMISSES WITHOUT PREJUDICE Counter-Plaintiffs’ breach of contract
cause of action (Count XIII) (ECF No. 43).
E. 	Breach of Implied Covenant of Good Faith and Fair Dealing
In California, “[t]here is an implied covenant of good faith and fair dealing in every
contract that neither party will do anything which will injure the right of the other to receive
the benefits of the agreement.” Comunale v. Traders & Gen. Ins. Co., 50 Cal. 2d 654, 659
(1958). The factual elements necessary to establish a breach of the covenant of good faith
and fair dealing in California are: (1) the parties entered into a contract; (2) the plaintiff
fulfilled his obligations under the contract; (3) any conditions precedent to the defendant's
performance occurred; (4) the defendant unfairly interfered with the plaintiff's rights to
receive the benefits of the contract; and (5) the plaintiff was harmed by the defendant's
conduct. Rosenfeld v. JPMorgan Chase Bank, N.A., 732 F. Supp. 2d 952, 968 (N.D. Cal.
2010) (citing Judicial Council of California Civil Jury Instruction 325).
Importantly, the implied covenant of good faith and fair dealing “cannot impose
substantive duties or limits on the contracting parties beyond those incorporated in the
Case 3:24-cv-02251-BAS-MSB Document 115 Filed 01/14/26 PageID.<pageID>
Page 26 of 43

- 27 - 24cv2251
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
specific terms of their agreement.” 	Rosenfeld, 732 F. Supp. 2d at 968 (citing Agosta v.
Astor, 120 Cal.App.4th 596, 607 (2004)). 	“Absent [a] contractual right ... the implied
covenant has nothing upon which to act as a supplement, and should not be endowed with
an existence independent of its contractual underpinnings.” Waller v. Truck Ins. Exchange,
Inc., 11 Cal.4th 1, 36 (1995).
Here, Counter-Plaintiffs bring a cause of action for breach of implied covenant of
good faith and fair dealing against Counter-Defendants for: (1) failing to pay wages and
commissions owed to the Counter-Plaintiffs in a timely manner; (2) interfering with NEO’s
operational autonomy despite promises to protect it; (3) failing to provide services as
agreed; (4) deducting more from NEO’s Profit and Loss (“P&L”) than agreed for the
services that were provided; and (5) restricting Horanyi’s ability to solicit NEO employees.
(ECF No. 43 ¶ 146.)
As discussed in the prior section, supra § III.D, Counter-Plaintiffs have failed to
allege 	Counter-Defendants’ 	contractual 	obligations 	regarding 	paying 	wages 	and
commissions, NEO’s operational autonomy, providing services or operational support,
granting Horanyi’s ability to solicit NEO employees. Moreover, Counter-Plaintiffs have
failed to allege any contractual provision or language specifying the amount that Counter-
Defendants allegedly agreed to deduct from NEO’s P&L for services rendered—or even
that Counter-Defendants only agreed to deduct an established amount of money from
NEO’s P&L. 	In the absence of adequately pled contractual obligations regarding the
above, the Court finds that Counter-Plaintiffs have also failed to plead a breach of implied
covenant of good faith and fair dealing for the same. 	See Rosenfeld, 732 F. Supp. 2d at
968 (N.D. Cal. 2010); Waller v. Truck Ins. Exch., Inc., 11 Cal. 4th 1, 36 (Oct. 26, 1995)
For the reasons above, the Court GRANTS Counter-Defendants’ motion (ECF No.
57) and DISMISSES WITHOUT PREJUDICE Counter-Plaintiffs’ breach of implied
covenant of good faith and fair dealing (Count XIV) (ECF No. 43).
F. 	Unjust Enrichment
Case 3:24-cv-02251-BAS-MSB Document 115 Filed 01/14/26 PageID.<pageID>
Page 27 of 43

- 28 - 24cv2251
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
Unjust enrichment is not an independent cause of action under California law;
though, can be treated as a quasi-contract claim for restitution. 	See Astiana v. Hain
Celestial Grp., Inc., 783 F.3d 753, 762 (9th Cir. 2015) (“When a plaintiff alleges unjust
enrichment, a court may construe the cause of action as a quasi-contract claim seeking
restitution.”); see also ESG Capital Partners, LP v. Stratos, 828 F.3d 1023, 1038 (9th Cir.
2016); De Havilland v. FX Networks, LLC, 21 Cal. App. 5th 845, 870 (2018) (“Unjust
enrichment is not a cause of action. It is just a restitution claim.”).
Here, 	Counter-Plaintiffs 	bring 	an 	independent 	cause 	of 	action 	for 	unjust
enrichment—which is procedurally incorrect. See e.g., Patrick v. Volkswagen Grp. of Am.,
Inc., No. SACV191908JVSADSX, 2020 WL 3883275, at *7 (C.D. Cal. Mar. 5, 2020)
(citing Melchior v. New Line Prods., Inc. 106 Cal. App. 4th 779, 793 (2003)) (“There is no
cause of action for unjust enrichment in California.”). 	Though, as part of Counter-
Plaintiffs’ cause of action for unjust enrichment (Count XV), Counter-Plaintiffs seek
restitution for “unpaid wages, commissions, and other compensation and benefits” (ECF
No. 43 ¶ 158); and “court[s] may construe [a] cause of action [for unjust enrichment] as a
quasi-contract claim seeking restitution.” 	Melchior, 106 Cal. App. 4th at 793.
Even if the Court were to reconstrue Counter-Plaintiffs’ unjust enrichment cause of
action as a quasi-contract restitution claim, restitution is not available where Counter-
Plaintiffs also seek monetary damages for the same conduct and do not explain how
monetary damages alone are insufficient to compensate Counter-Plaintiffs. See Rodriguez
v. Just Brands USA, Inc., No. CV 20-4829-ODW (PLAx), 2021 WL 1985031, at *8 (C.D.
Cal. May 18, 2021) (“Plaintiff fails to plausibly allege it lacks an adequate remedy at law
for restitution beyond the damages it already seeks through its other claims.”); cf Nacarino
v. KSF Acquisition Corp., 642 F. Supp. 3d 1074, 1082-83 (N.D. Cal. 2022) (finding claims
for damages were based on precisely the same conduct as equitable claims for restitution
and dismissing based on availability of equitable remedies). Here, Counter-Plaintiffs
request compensatory damages for “economic losses, such as back pay, front pay,
commissions, and benefits” without addressing how restitution is an additionally necessary
Case 3:24-cv-02251-BAS-MSB Document 115 Filed 01/14/26 PageID.<pageID>
Page 28 of 43

- 29 - 24cv2251
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
remedy for the same alleged loss of wages and compensation (see ECF No. 43 at 36). In
sum, even as a quasi-contract claim for restitution, Counter-Plaintiffs have inadequately
pled the necessary facts to support an unjust enrichment cause of action.
For the reasons above, the Court thus GRANTS Counter-Defendants’ motion (ECF
No. 57) and DISMISSES WITHOUT PREJUDICE Counter-Plaintiffs’ cause of action
for unjust enrichment (Count XV) (ECF No. 43).2
G. 	Fraudulent Misrepresentation
Counter-Plaintiffs assert a cause of action for fraudulent misrepresentation (Count
XVI) based on Counter-Defendants’ alleged “false and misleading statements . . . to induce
[Counter-Plaintiffs] to join and remain employed by Luminate,” including “promises that
NEO would retain operational autonomy, that its proprietary systems and intellectual
property would remain protected, and that the Counter-Plaintiffs would have job security
and stable leadership roles within the organization” (ECF No. 43 ¶ 160). Counter-Plaintiffs
also state that “Reuter and Luminate further assured the Counter-Plaintiffs that Luminate
would provide the resources and support necessary to ensure NEO’s success and growth.”
(Id.)
Counter-Defendants argue that Counter-Plaintiffs’ fraudulent misrepresentation
cause of action should be dismissed because their claims fail to meet the heightened
pleading standard for fraud claims established by Federal Rule of Civil Procedure 9(b).
Under Rule 9(b), “the circumstances constituting the alleged fraud [must] be specific
enough to give defendants notice of the particular misconduct so that they can defend
against the charge and not just deny that they have done anything wrong.” Lincoln Imports
2 Counter-Defendants assert that Counter-Plaintiffs’ cause of action for unjust enrichment also
fails here because in California, parties cannot assert unjust enrichment claims when they’ve asserted
breach of contract claims covering the same subject matter. (ECF No. 57-1 at 25 (citing Lance Camper
Mfg. Corp. v. Republic Indem. Co., 44 Cal. App. 4th 194, 203 (1996)). Though this may be true, the Court
does not reach this issue here because the Court has found that Counter-Plaintiffs have inadequately pled
their breach of contract claim. Further, even if Counter-Plaintiffs did adequately plead the existence of a
valid and enforceable contract, the Court would still find that Counter-Plaintiffs had inadequately pled
their cause of action for unjust enrichment on that basis. See Lance Camper Mfg. Corp., 44 Cal. App. 4th
at 203.
Case 3:24-cv-02251-BAS-MSB Document 115 Filed 01/14/26 PageID.<pageID>
Page 29 of 43

- 30 - 24cv2251
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
Ltd., Inc. v. Weaver Flower Co., No. SACV 11-1098-JST ANX, 2012 WL 1048531, at *2
(C.D. Cal. Mar. 27, 2012) (citing Vess v. Ciba–Geigy Corp. USA, 317 F.3d 1097, 1106 (9th
Cir. 2003)). “Averments of fraud must be accompanied by ‘the who, what, when, where,
and how’ of the misconduct charged.” 	Id. at 1106 (quoting Cooper v. Pickett, 137 F.3d
616, 627 (9th Cir. 1997)). 	In a fraud claim against a corporation, a plaintiff must allege
the names of the persons who made the misrepresentations, their authority to speak for the
corporation, to whom they spoke, what they said or wrote, and when it was said or written.
authority to speak for the corporation, to whom they spoke, what they said or wrote, and
when it was said or written. 	Perlas v. GMAC Mortg., LLC, 187 Cal. App. 4th 429, 434
(2010) (citing Lazar v. Superior Court, 12 Cal.4th 631, 645 (1996)). 	A corporation is
responsible for a corporate officer's fraud committed “within the scope of his employment”
or “for a misleading statement made by an employee or other agent who has actual or
apparent authority.” In Re ChinaCast Educ. Corp Sec. Litig., 809 F.3d 471, 476 (9th Cir.
2015). While the Rule 9(b) requirement is a federally imposed rule, “a federal court will
examine state law to determine whether the elements of fraud have been pled sufficiently
to state a cause of action.” Id. at 1103.
Regarding 	“who” 	made 	the 	alleged 	fraudulent 	misrepresentations, 	Counter-
Plaintiffs allege that Luminate and Reuter allegedly made fraudulent statements directly to
Counter-Plaintiffs. Counter-Plaintiffs identify Reuter as the agent of Luminate in making
the alleged misrepresentation. 	Counter-Plaintiff further allege that Reuter is the CEO of
Luminate (ECF No. 43 ¶ 18), meaning he has “authority to speak for the corporation.”
Perlas, 187 Cal. App. 4th at 434. 	The Court thus, assumes that Counter-Plaintiff is
asserting fraudulent misrepresentation claims against both Luminate and Reuter based on
Reuter’s misrepresentations. Cf PMC, Inc. v. Kadisha, 78 Cal. App. 4th 1368, 1381 (2000)
(corporate officers acting in their official capacity committing intentional torts can be
personally liable for those torts).
Regarding “what” was said, Counter-Plaintiffs allege inter alia, that Counter-
Defendants misrepresented that NEO would have “the same degree of freedom and
Case 3:24-cv-02251-BAS-MSB Document 115 Filed 01/14/26 PageID.<pageID>
Page 30 of 43

- 31 - 24cv2251
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
independence that it had at Celebrity,” “continue to own its own assets,” “would remain a
functionally independent partner of Luminate, and that NEO could eventually purchase the
‘shell’ of Luminate’s . . . loan division,” and “NEO executives, including Horanyi, would
be free to solicit other NEO employees to leave.” 	(ECF No. 43 ¶¶ 20–22, 24.)
Regarding “when,” Reuter and Luminate allegedly stated the above in 2022, the year
that Luminate was in the process of acquiring NEO, including NEO’s employees. 	(Id. ¶
18).
Though Counter-Plaintiffs do not allege “where” the statements were made and
“how” they were made, the Court finds the above facts to be sufficiently specific for
Counter-Defendants to identify the relevant violative statements and challenge the claim.
As such, Counter-Plaintiffs meet the heightened pleading standard of Rule 9(b).
Next, the Court evaluates whether Counter-Plaintiffs have adequately pleaded a
claim for fraudulent misrepresentation. In California, “[t]he elements of fraud, which gives
rise 	to 	the 	tort 	action 	for 	deceit, 	are 	(a) 	misrepresentation 	(false 	representation,
concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to
defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.” 	Small
v. Fritz Companies, Inc., 30 Cal.4th 167, 173 (2003); Lazar, 12 Cal.4th at 638. The statute
of limitations in California for fraud is three years. Cal. Civ. Proc. Code § 338; Solomon v.
North American Life and Cas. Ins. Co., 151 F.3d 1132, 1137–38 (9th Cir. 1998); General
Bedding Corp. v. Echevarria, 947 F.2d 1395, 1397 (9th Cir. 1991).
Again, Counter-Plaintiffs assert, inter alia, that Counter-Defendants misrepresented
that NEO would have “the same degree of freedom and independence that it had at
Celebrity,” “continue to own its own assets,” “would remain a functionally independent
partner of Luminate, and that NEO could eventually purchase the ‘shell’ of Luminate’s . .
. loan division,” and “NEO executives, including Horanyi, would be free to solicit other
NEO employees to leave.” 	(ECF No. 43 ¶¶ 20–22, 24.)
Counter-Plaintiffs have failed to make sufficient allegations supporting their claim
that the preceding statements are false. 	First, Counter-Plaintiffs do not provide detail
Case 3:24-cv-02251-BAS-MSB Document 115 Filed 01/14/26 PageID.<pageID>
Page 31 of 43

- 32 - 24cv2251
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
regarding how Luminate has deprived NEO of the “same degree of freedom and
independence” it had at Celebrity, how NEO does not qualify as a “functionally
independent partner of Luminate.” (See id.) Also, Counter-Plaintiffs allege that they still
own their own assets, meaning Counter-Defendants’ representation that NEO would
“continue to own its own assets” is not false. (See ECF No. 43 ¶¶ 16, 26 (“NEO owns (and
has always owned) its own brand and intellectual property.”)). 	Next, Counter-Plaintiffs
alleges that they could have purchased a “shell” of Luminate’s loan division, but that the
terms of the relevant purchasing agreement were ultimately unfavorable. (Id. ¶ 35.) Since
Counter-Plaintiffs fail to allege a misrepresentation, they also failed to allege a cause of
action for fraudulent misrepresentation.3
For the reasons above, the Court thus GRANTS Counter-Defendants’ motion (ECF
No. 57) and DISMISSES WITHOUT PREJUDICE Counter-Plaintiffs’ cause of action
for fraudulent misrepresentation (Count XVI) (ECF No. 43).
H. 	Unfair Business Practices (Bus. & Prof. Code § 17200)
Counter-Plaintiffs bring a cause of action for violation of Cal. Bus. & Prof. Code §
17200 (“UCL”) (Count XVII) (ECF No. 43). California's UCL provides a cause of action
for business practices that are (1) unlawful, (2) unfair, or (3) fraudulent. Cal. Bus. & Prof.
Code § 17200. The UCL's coverage is “sweeping,” and its standard for wrongful business
conduct “intentionally broad.” 	In re First Alliance Mortg. Co., 471 F.3d 977, 995 (9th
Cir.2006) (citing Cel–Tech Commc'ns., Inc. v. L.A. Cellular Tel. Co., 20 Cal.4th 163, 83
3 Additionally, Counter-Defendants argue that Counter-Plaintiffs’ fraudulent misrepresentation
claims should be dismissed in their entirety, since the claim “rests on alleged oral promises made in the
context of an at-will employment relationship” which “cannot form the basis for a fraud claim under well-
settled California law.” (ECF No. 57-1 at 25:25-28.) As discussed, Counter-Plaintiffs do not allege how
the statements were made (e.g., oral or written). Even if Counter-Plaintiffs had alleged that the statements
were made orally, it is only well-settled that oral promises of continuing employment cannot form the
basis for a fraud claim under California law. See e.g., Nisbet v. Am. Nat'l Red Cross, 795 F. App'x 505,
508 (9th Cir. 2019) (citing Slivinsky v. Watkins-Johnson Co., 221 Cal.App.3d 799, 270 Cal. Rptr. 585,
589 (1990)). 	Accordingly, the Court would only dismiss Counter-Plaintiffs’ claims that Counter-
Defendants fraudulently misrepresented that “Counter-Plaintiffs would have job security and stable
leadership roles within the organization” (ECF No. 43 ¶ 160) on that basis.
Case 3:24-cv-02251-BAS-MSB Document 115 Filed 01/14/26 PageID.<pageID>
Page 32 of 43

- 33 - 24cv2251
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
Cal.Rptr.2d 548, 973 P.2d 527 (1999)). 	The unlawful prong of the UCL “borrows
violations of other laws and treats them as unlawful practices,” which the UCL then “makes
independently actionable.” Cel–Tech Commc'ns, Inc., 20 Cal.4th at 180.
First, Counter-Plaintiffs allege a UCL claim based on the same conduct underlying
Counter-Plaintiff’s Cal. Bus. & Prof. Code § 16600 cause of action (Count IX)—that
Counter-Defendants “sought to impose non-compete restrictions . . . unenforceable under
[Cal. Bus. & Prof. Code § 16600 et seq.], which voids any agreement that restrains an
individual’s ability to engage in lawful profession.” (ECF No. 43 ¶ 166.) Since Horanyi
adequately alleged a Cal. Bus. & Prof. Code § 16600 claim, supra § III.A.11, Horanyi has
also adequately alleged a separate UCL claim on the basis that Counter-Defendants
engaged in “unlawful” business practices. However, the Court finds the opposite for Lee,
who has not adequately alleged a Cal. Bus. & Prof. Code § 16600 claim, supra § III.A.11.
Second, 	Counter-Plaintiffs 	allege 	a 	UCL 	claim 	based 	on 	the 	same 	conduct
underlying Counter-Plaintiff’s defamation cause of action – that Counter-Defendants
“disseminated false and defamatory statements about the Counter-Plaintiffs to deter
prospective employers and business partners.” (ECF No. 43 ¶ 166.) For the same reasons
some of Counter-Plaintiffs’ defamation claims (Count XI) fail, supra § III.C, Counter-
Plaintiffs also fail to allege that Counter-Defendants engaged in “unlawful,” “unfair,” or
“fraudulent” conduct prohibited by the UCL regarding Counter-Defendants’ alleged
statement that Horanyi is “cancer” (ECF No. 43 ¶ 51), and Counter-Defendants’ alleged
statement that Counter-Plaintiffs acted “unlawfully and unethically” (id. ¶ 50) (Count XI).
However, Counter-Plaintiffs have adequately alleged a claim for defamation regarding
Counter-Plaintiff’s statement to NEO’s Florida employees (id. ¶ 53) (Count XI). As such,
Counter-Plaintiffs have also adequately alleged a UCL claim based on that statement.
Third, Counter-Plaintiffs allege a UCL claim based on Counter-Plaintiff’s tortious
interference 	with 	prospective 	economic 	advantage 	cause 	of 	action—that 	Counter-
Defendants “threatened legal action against the Counter-Plaintiffs and their prospective
employers.” 	(ECF No. 43 ¶ 166.) 	For the same reasons Counter-Plaintiffs’ tortious
Case 3:24-cv-02251-BAS-MSB Document 115 Filed 01/14/26 PageID.<pageID>
Page 33 of 43

- 34 - 24cv2251
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
interference cause of action (Count XII) fails, supra § III.C.1.ii, Counter-Plaintiffs also fail
to prove that Counter-Defendants engaged in “unlawful,” “unfair,” or “fraudulent” conduct
prohibited by the UCL.
Fourth, Counter-Plaintiffs allege a UCL claim based on Counter-Plaintiff’s breach
of contract cause of action – that Counter-Defendants “misappropriated NEO’s intellectual
property and attempted to leverage its operational and proprietary resources for Counter-
Defendants’ benefit in violation of contractual and legal obligations.” (ECF No. 43 ¶ 166.)
“[A] breach of contract may in fact form the predicate for Section 17200 claims, provided
it also constitutes conduct that is “unlawful, or unfair, or fraudulent.” 	Watson Labs., Inc.
v. Rhone–Poulenc Rorer, Inc., 178 F. Supp. 2d 1099, 1117 n. 12 (C.D. Cal. 2001).
However, in this case, (1) Plaintiff has failed to properly state a cause of action for breach
of contract, and (2) Plaintiff has failed to properly state a cause of action for fraud, or
otherwise unfair business conduct.
In sum, the Court DENIES Counter-Defendants’ motion to dismiss (ECF No. 57)
Horanyi’s UCL claim against Counter-Defendants based on an alleged violation of Cal.
Bus. Code. § 16600 (Count XVII) (ECF No. 43). 	However, the Court DISMISSES
WITHOUT PREJUDICE Counter-Plaintiffs’ remaining UCL claims (Count XVII) (ECF
No. 43). For the latter claims, the Court GRANTS Counter-Defendants’ motion (ECF No.
57).
I. 	Conversion
Counter-Plaintiffs assert a cause of action for conversion (Count XVIII) (ECF No.
43 ¶¶ 169–173). In California, three elements comprise a cause of action for conversion.
First, the plaintiff owned, possessed, or had the right to possess an item of personal
property. 	Second, the defendant intentionally took wrongful possession of, disposed of,
and/or prevented the plaintiff from having access to the property for a significant period of
time. Third, the plaintiff was harmed by the defendant's actions. 	Mindys Cosmetics, Inc.
v. Dakar, 611 F.3d 590, 601 (9th Cir. 2010) (citing Oakdale Vill. Group v. Fong, 43 Cal.
App. 4th 539, 543–44 (1996)).
Case 3:24-cv-02251-BAS-MSB Document 115 Filed 01/14/26 PageID.<pageID>
Page 34 of 43

- 35 - 24cv2251
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
Here, Counter-Plaintiffs allege that Luminate had wrongfully failed to reimburse
them for money Counter-Plaintiffs spent in the course of their work at Luminate—which
was accounted for through “cost centers” at Luminate. 	(ECF No. 43 ¶¶ 170–173.)
Counter-Plaintiffs’ conversion claim principally fails because Counter-Plaintiffs do not
adequately allege ownership rights over the funds allegedly withheld by Luminate. Though
Counter-Plaintiffs assert that Luminate had created a process to account for costs incurred
by Counter-Plaintiffs pursuant to an agreement, “[the] contractual right of payment,
without more, does not entitle the obligee to the immediate possession necessary to
establish a cause of action for the tort of conversion.” 	In re Bailey, 197 F.3d 997, 1000
(9th Cir. 1999) (citing Imperial Valley Co. v. Globe Grain & Milling Co., 187 Cal. 352,
202 P. 129 (1921)). Though Luminate had allegedly agreed to pay the funds at issue after
terminating Counter-Plaintiffs, “the simple failure to pay money owed does not constitute
conversion.” 	Voris v. Lampert, 7 Cal. 5th 1141, 1151 (2019) (citing Kim v. Westmoore
Partners, Inc. 201 Cal.App.4th 267, 284 (2011)).
In addition, Counter-Plaintiffs fail to oppose Counter-Defendants’ motion to dismiss
their conversion cause of action (Count XVIII), which alone is grounds for dismissal
without prejudice. See Kwan, 2013 WL 3831275, at *8.
Thus, 	the 	Court 	DISMISSES 	WITHOUT 	PREJUDICE 	Counter-Plaintiffs’
conversion claim (Count XVIII) (ECF No. 43). Regarding Counter-Plaintiffs’ conversion
claim, the Court GRANTS Counter-Defendants’ motion (ECF No. 57).
J. 	Accounting
Counter-Plaintiffs assert a cause of action for accounting (Count XIX) (ECF No. 43
¶¶ 174–179). 	In California, “[a]n accounting may be brought to compel a defendant to
account to a plaintiff for money where (1) a fiduciary duty exists; or (2) where no fiduciary
exists, the accounts are so complicated that an ordinary legal action demanding a fixed sum
is impracticable.” Wise v. Wells Fargo Bank, N.A., 850 F. Supp. 2d 1047, 1055 (C.D. Cal.
2012).
Case 3:24-cv-02251-BAS-MSB Document 115 Filed 01/14/26 PageID.<pageID>
Page 35 of 43

- 36 - 24cv2251
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
The right to an accounting is derivative of other claims as an equitable remedy.
Arostegui v. Bank of Am., No. C 13-6009 PJH, 2014 WL 1230762, at *7 (N.D. Cal. Mar.
21, 2014) (citing Janis v. California State Lottery Com., 68 Cal.App. 4th 824, 833–34
(1998)). 	Here, Counter-Plaintiffs appear to assert a cause of action for accounting as
derivative of Counter-Plaintiffs’ cause of action for conversion (Count XVIII). 	The
Court’s dismissal of Counter-Plaintiffs’ cause of action for conversion also provides
grounds to dismiss Counter-Plaintiffs’ cause of action for accounting (Count XIX). 	See
e.g., Attilius LLC v. Larsen-Haslem Dental, LLC, No. 22-CV-0899-L-KSC, 2022 WL
16824495, at *6 (S.D. Cal. Nov. 7, 2022) (granting dismissal of plaintiff's accounting
claim, as it rises and falls with the conversion claim).
Even if Counter-Plaintiffs’ counterclaim for accounting could proceed, Counter-
Plaintiffs fail to assert that Luminate owes Counter-Plaintiffs a fiduciary duty. 	Counter-
Plaintiffs allege that the relationship between Luminate and Counter-Plaintiffs is one of
former employer-employee; and relatedly, one in which Luminate had tracked expenses
Counter-Plaintiffs had spent in the course of their employment. 	In California, the
employer-employee relationship does not give rise to a fiduciary duty absent a special
circumstance, such as when “unusual circumstances give rise to an unusual level of trust
or vulnerability.” Turner-Gray v. Avis Budget Grp. Inc., No. 23-CV-05507-SI, 2024 WL
4504529, at *5 (N.D. Cal. Oct. 15, 2024) (citing Amid v. Hawthorne Cmty. Med. Grp., Inc.,
212 Cal. App. 3d 1383, 1391 (1989)); Kabushiki Kaisha Megahouse v. Anjar Co. LLC, No.
2:14-CV-00598-CAS, 2014 WL 5456523, at *10 (C.D. Cal. Oct. 20, 2014) (applying
California law). 	Further, simply tracking expenses does not give rise to a special
relationship that can establish a fiduciary duty between an employer and employee. Cf IT
Corp. v. Gen. Am. Life Ins. Co., 107 F.3d 1415, 1419 (9th Cir. 1997) (“bookkeeping
service” is not a fiduciary, since “ministerial duties” do not transform non-fiduciaries into
fiduciaries).
In the alternative, Counter-Plaintiffs fail to assert that “accounts are so complicated
that an ordinary legal action demanding a fixed sum is impracticable.” Wise, 850 F. Supp.
Case 3:24-cv-02251-BAS-MSB Document 115 Filed 01/14/26 PageID.<pageID>
Page 36 of 43

- 37 - 24cv2251
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
2d at 1055. Here, Counter-Plaintiffs allege that Luminate has not paid outstanding balances
calculated by their accounting methodology, and that “Luminate has never properly
identified or otherwise accounted for all monies held by Luminate in the NEO Cost Center
Funds or Personal Cost Center.” (ECF No. 43 ¶¶ 169–176.) However, “[s]imply stating
that the amount owed to Plaintiff is unknown is insufficient to show that the accounts are
so complicated that an ordinary claim for breach of contract would be inadequate to afford
proper relief.” 	Attilius LLC v. Larsen-Haslem Dental, LLC, No. 22-CV-0899-L-KSC,
2022 WL 16824495, at *6 (S.D. Cal. Nov. 7, 2022).
In addition, Counter-Plaintiffs fail to oppose Counter-Defendants’ motion to dismiss
their accounting cause of action (Count XIX), which alone is grounds for dismissal without
prejudice. See Kwan, 2013 WL 3831275, at *8.
Thus, 	the 	Court 	GRANTS 	Counter-Defendants’ 	motion 	(ECF 	No. 	57) 	and
DISMISSES WITHOUT PREJUDICE Counter-Plaintiffs’ conversion claim (Count
XIX) (ECF No. 43).
K. 	Declaratory Relief
Counter-Plaintiffs seek declaratory relief (Count XX) to establish the following: (1)
the 	agreements 	Counter-Defendants 	required 	Counter-Plaintiffs 	to 	sign 	agreements
violating California law, both in seeking to impose foreign choice of law and by prohibiting
solicitation and competition (ECF No. 43 ¶ 181); (2) Parties’ rights and obligations
concerning accounts and/or funds accounted by Luminate’s NEO Cost Center or Personal
Cost Center (id. ¶¶ 183, 187).
These claims for declaratory relief relate to Counter-Plaintiffs’ substantive claims
regarding: (1) Cal. Lab. Code § 925 and Cal. Bus. & Prof. Code § 16600 (Count IX) (ECF
No. 43 ¶¶ 105–112) and (2) conversion (Count XVIII) (id. ¶¶ 169–173). Since Counter-
Plaintiffs have failed to plead their cause of action for conversion (Count XVIII), the Court
also 	DISMISSES 	WITHOUT 	PREJUDICE 	Counter-Plaintiffs’ 	counterclaim 	for
declaratory relief regarding Parties’ rights and obligations concerning accounts and/or
funds accounted by Luminate’s NEO Cost Center or Personal Cost Center (id. ¶¶ 183, 187).
Case 3:24-cv-02251-BAS-MSB Document 115 Filed 01/14/26 PageID.<pageID>
Page 37 of 43

- 38 - 24cv2251
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
Relatedly, since the Court dismissed Lee’s Cal. Bus. & Prof. Code §§ 16600, 16600.5
counterclaim 	(Count 	IX), 	the 	Court 	also 	DISMISSES 	WITHOUT 	PREJUDICE
Counter-Plaintiffs’ request to impose declaratory relief that Counter-Defendants required
Lee to sign an agreement violating California law, both in seeking to impose foreign choice
of law and by prohibiting solicitation and competition. (ECF No. 43 ¶ 181).
However, since the Court denied dismissal of Horanyi’s Cal. Bus. & Prof. Code §§
16600, 16600.5 claim (Count IX), the Court further evaluates whether to grant declaratory
relief that Counter-Defendants required Horanyi to sign an agreement with a noncompete
clause (see ECF No. 43 ¶ 28) in violation of California law. 	Declaratory relief is
appropriate where “there is a substantial controversy, between parties having adverse legal
interests, of sufficient immediacy and reality to warrant the issuance of declaratory
judgment.” Boeing Co v. Cascade Corp., 207 F.3d 1177, 1192 (9th Cir. 2000). Here, there
is an actual controversy as to the legal validity of a contract between Counter-Defendants
and Horanyi. Accordingly, for the same reasons the Court denied dismissal of Horanyi’s
Cal. Bus. & Prof. Code §§ 16600, 16600.5 claim (Count IX), the Court DENIES Counter-
Defendants’ motion to dismiss.
L. 	California Invasion of Privacy Act (California Penal Code § 632)
Counter-Plaintiffs bring a cause of action for violation of the California Invasion of
Privacy Act, California Penal Code § 632(a) (“CIPA § 632(a)”) (Count XXI) for Counter-
Defendants’ alleged recordings of their telephone calls and Zoom calls (ECF No. 43 ¶¶
188–198). CIPA § 632(a) prohibits the making of a recording without the consent of all
parties. Safari Club Int'l v. Rudolph, No. SACV131989JVSANX, 2014 WL 12577408, at
*5 (C.D. Cal. May 14, 2014). The three elements of a CIPA § 632(a) claim include: “(1)
an electronic recording of (or eavesdropping on); (2) a ‘confidential’ communication; and
(3) all parties did not consent.” 	Weiner v. ARS Nat. Servs., Inc., 887 F. Supp. 2d 1029,
1032 (S.D. Cal. 2012) (citing Flanagan v. Flanagan, 27 Cal.4th 766, 774–76 (2002)). A
communication is confidential under CIPA § 632(a) if one of the parties “has an objectively
reasonable expectation that the conversation is not being overheard or recorded.” 	In re
Case 3:24-cv-02251-BAS-MSB Document 115 Filed 01/14/26 PageID.<pageID>
Page 38 of 43

- 39 - 24cv2251
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
Meta Pixel Healthcare Litig., 647 F. Supp. 3d 778, 798 (N.D. Cal. 2022) (citing Flanagan,
27 Cal. 4th at 777).
In California, courts have developed a presumption that Internet communications do
not reasonably give rise to the reasonable expectation of privacy. 	Revitch v. New
Moosejaw, LLC, No. 18-cv-06827-VC, 2019 WL 5485330, at *3 (N.D. Cal. Oct. 23, 2019)
(citing and collecting authorities); see also Rodriguez v. Google LLC, No. 20-CV-04688-
RS, 2021 WL 2026726 at *7 (N.D. Cal. May 21, 2021) (explaining that plaintiffs “must
plead unique, definite circumstances” to rebut California's presumption against online
confidentiality). Since Zoom calls take place over the internet, the Court finds they are not
“confidential communications” that can provide the basis for a CIPA § 632(a) claim.
Next, the Court evaluates whether Counter-Plaintiffs’ telephone calls can constitute
“confidential” communications for which Counter-Plaintiffs had a reasonable expectation
of privacy. 	Factors affecting whether Counter-Plaintiffs had a reasonable expectation of
privacy include: whether Counter-Plaintiffs had “some reason to suspect” that their
employer was recording their phone conversations and whether Counter-Plaintiffs had
received written disclosure that their phone conversations would be recorded. See Troyer
v. The Yerba Mate Co., LLC, No. 20-06065-WHA, 2021 WL 2662109, at *10 (N.D. Cal.
June 29, 2021) (employee did not have reasonable expectation of privacy under CIPA §
632 where employee had some reason to suspect that the cameras in employer warehouse
also recorded audio); see also Rojas v. HSBC Card Servs. Inc., 93 Cal. App. 5th 860, 886
(2023) (plaintiff did not have reasonable expectation of privacy where cardmember
agreement contained disclosures of recording calls).
Here, Counter-Plaintiffs cite Counter-Defendants’ expert declaration by Luminate’s
Executive Vice President for IT and Security, Mike Pelham (see ECF Nos. 23-2 ¶ 3; 43 ¶¶
58–60). In the declaration, Pelham makes clear that all Luminate employees were notified
by an employee handbook that their work devices were monitored by Luminate and
communications may be recorded (id. ¶ 5). 	Since Counter-Plaintiffs’ allegations are
allegedly based solely on Pelham’s declaration, the Court assumes for purposes of this
Case 3:24-cv-02251-BAS-MSB Document 115 Filed 01/14/26 PageID.<pageID>
Page 39 of 43

- 40 - 24cv2251
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
order that Counter-Plaintiffs had used their work devices to place the telephone calls at
issue in their claims, and that Counter-Plaintiffs had written notice that their calls may be
recorded 	by 	Counter-Defendants. 	Accordingly, 	Counter-Plaintiffs’ 	fail 	to 	plead 	a
reasonable expectation of privacy regarding their phone calls. 	See Rojas, 93 Cal. App. 5th
at 886.
Thus, 	the 	Court 	GRANTS 	Counter-Defendants’ 	motion 	(ECF 	No. 	57) 	and
DISMISSES WITHOUT PREJUDICE Counter-Plaintiffs’ CIPA § 632(a) claim (Count
XX) (ECF No. 43).
M. 	Punitive Damages
Counter-Plaintiffs seek punitive damages (Count XXII) based on the following
alleged conduct by Counter-Defendants (ECF No. 43 ¶ 201):
1. Disseminating false and defamatory statements about the Counter-Plaintiffs,
accusing them of unethical conduct and trade secret misappropriation without
factual basis;
2. Interfering with the Counter-Plaintiffs’ lawful employment opportunities by
threatening legal action against prospective employers and spreading false
information to harm their reputations;
3. Improperly accessing and wiping the Counter-Plaintiffs’ computers without
authorization, destroying personal and professional data;
4. Failing to pay earned wages and benefits owed to the Counter-Plaintiffs while
making baseless accusations to justify their wrongful termination; and
5. Illegal recording and eavesdropping of Counter-Plaintiffs’ private telephone and
virtual conversations.
Respectively, the above conduct also underlies Counter-Plaintiffs’ substantive
claims for: defamation (Count XI), tortious interference with economic prospects (Count
XII), California Labor Code wage claims (Counts III, IV, VII), and CIPA § 632(a) (Count
XXI).
Case 3:24-cv-02251-BAS-MSB Document 115 Filed 01/14/26 PageID.<pageID>
Page 40 of 43

- 41 - 24cv2251
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
Since Counter-Plaintiffs failed to allege the aforementioned substantive claims, the
Court GRANTS Counter-Defendants’ motion to dismiss (ECF No. 57) and DISMISSES
WITHOUT PREJUDICE Counter-Plaintiffs’ claim for punitive damages. 	See e.g.,
Terpin v. AT&T Mobility, LLC, 399 F. Supp. 3d 1035, 1050 n.5 (C.D. Cal. 2019) (“As the
Court finds that the claims on which [plaintiff] seeks punitive damages have not been
sufficiently pleaded, [plaintiff]'s request for punitive damages is also DISMISSED with
leave to amend”).
IV. 	CONCLUSION
For the reasons discussed herein, the Court GRANTS Counter-Defendants’ motion
to dismiss (ECF No. 57) the following causes of action, which are 	DISMISSED
WITHOUT PREJUDICE and GRANTED leave to amend:
1. Count I: Failure to Provide Required Meal Periods (Horanyi) (Cal. Labor
Code §§ 226.7, 512)
2. Count II: Failure to Provide Required Rest Periods (Horanyi) (Cal. Lab. Code
§§ 226.7, 512)
3. Count III: Failure to Pay Overtime Wages (Horanyi) (Cal. Lab. Code §§ 510,
1194, 1198)
4. Count IV: Failure to Pay Minimum Wages (Horanyi) (Cal. Lab. Code §§
1194, 1197)
5. Count V: Liquidated Damages (Horanyi) (Cal. Lab. Code § 1194.2)
6. Count VI: Failure to Provide Accurate Wage Statements (Cal. Lab. Code §
226)
7. Count 	VII: 	Failure 	to 	Pay 	Final 	Wages/Waiting-Time 	Penalties 	for
Nonpayment of Wages under the California Labor Code
8. Count VIII: Failure to Reimburse Expenses & Losses (Cal. Lab. Code §2802)
9. Count X: Wrongful Termination in Violation of Public Policy (Gov’t Code
§12940 et. seq.)
10.Count XII: Tortious Interference with Prospective Economic Advantage
Case 3:24-cv-02251-BAS-MSB Document 115 Filed 01/14/26 PageID.<pageID>
Page 41 of 43

- 42 - 24cv2251
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
11.Count XIII: Breach of Contract
12.Count XIV: Breach of Implied Covenant of Good Faith and Fair Dealing
13.Count XV: Unjust Enrichment
14.Count XVI: Fraudulent Misrepresentation
15.Count XVIII: Conversion
16.Count XIX: Accounting
17.Count XXI: Violation of California Invasion of Privacy Act (California Penal
Code § 632)
18.Count XXII: Punitive Damages
The Court also GRANTS Counter-Defendants’ motion to dismiss (ECF No. 57)
regarding the following claims, which are DISMISSED WITHOUT PREJUDICE and
GRANTED leave to amend:
1. Count IX: Lee’s tortious interference claim
2. Count XX: Lee’s declaratory relief claim
3. Count XI: Counter-Plaintiffs’ defamation claim, to the extent it is based on
any of the following alleged statements by Counter-Defendants:
a. 	Counter-Plaintiffs shared unlawfully shared proprietary information
with Better
b. Horanyi had violated non-solicitation obligations in an agreement with
Counter-Defendants
c. 	Horanyi is cancer to Luminate as an organization
d. Counter-Plaintiffs acted unlawfully and unethically
4. Count XVII: Counter-Plaintiffs’ UCL claims, to the extent they are based on
Counter-Defendants’ allegedly defamatory statements that:
a. 	Counter-Plaintiffs shared unlawfully shared proprietary information
with Better
b. Horanyi had violated non-solicitation obligations in an agreement with
Counter-Defendants
Case 3:24-cv-02251-BAS-MSB Document 115 Filed 01/14/26 PageID.<pageID>
Page 42 of 43

- 43 - 24cv2251
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
c. 	Horanyi is cancer to Luminate as an organization
d. Counter-Plaintiffs acted unlawfully and unethically
However, the Court DENIES Counter-Defendants’ motion to dismiss (ECF No. 57)
regarding the following claims:
1. Count IX: Horanyi’s Cal. Bus. & Prof. Code § 16600.5 claim to void Section
5.8
2. Count XI: Counter-Plaintiffs claim for defamation, to the extent it is based on
Counter-Defendants’ allegedly defamatory statements to NEO’s Florida
employees
3. Count XVII:
a. 	Counter-Plaintiffs’ UCL claim, to the extent it is based on Counter-
Defendants’ 	allegedly 	defamatory 	statements 	to 	NEO’s 	Florida
employees
b. Horanyi’s UCL claim against Counter-Defendants, to the extent it is
based on an alleged violation of Cal. Bus. Code. § 16600
4. Count XX: Horanyi’s request for declaratory relief that Counter-Defendants
required Horanyi to sign an agreement containing Section 5.8 in violation of
California law
Counter-Plaintiffs may file an amended complaint on or before February 4, 2026.
Any amended complaint must follow the formatting requirements set forth in Civil Local
Rule 15.1.c.
IT IS SO ORDERED.
DATED: January 14, 2026
Hon. Cynthia Bashant, Chief Judge
United States District Court
Case 3:24-cv-02251-BAS-MSB Document 115 Filed 01/14/26 PageID.<pageID>
Page 43 of 43