AIR SYSTEMS SERVICE & CONSTRUCTION, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY vs MEDLEY, et al.

24CV024763: AIR SYSTEMS SERVICE & CONSTRUCTION, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY vs MEDLEY, et al. 12/11/2025 Hearing on Demurrer to Plaintiff's First Amended Complaint in Department 53

Tentative Ruling

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24CV024763: AIR SYSTEMS SERVICE & CONSTRUCTION, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY vs MEDLEY, et al. 12/11/2025 Hearing on Demurrer to Plaintiff's First Amended Complaint in Department 53

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TENTATIVE RULING

Defendants Craig Medley, Brent Mullens, Kevin Undercoffer, Travis Wise, Kevin Filippo, Ralph Perko, THP Mechanical LLC, and Stacy Therkildsen’s (“Defendants”) Demurrer to Plaintiff Air Systems Service & Construction, LLC’s (“Plaintiff”) First Amended Complaint (“FAC”) is ruled upon as follows.

This matter was previously continued from September 17, 2025 to October 15, 2025, to permit the parties to meet and confer. On October 1, 2025, Defendant filed a supplemental declaration indicating that the parties had further met and conferred, and that all issues raised in the demurrer required judicial intervention. On October 8, 2025, Defendants requested to continue hearing of this matter to December 11, 2025, which the Court granted.

Defendants’ unopposed request for judicial notice is granted for the purposes appropriate for judicial notice. (See Evid. Code § 452, subd. (d); see also Johnson & Johnson v. Superior Court (2011) 192 Cal.App.4th 757, 768 [court may take judicial notice of the existence of court documents but not to the truth of the statements contained therein].)

Factual Background

This case pertains to Defendants’ former employment by Plaintiff. The FAC alleges that Defendants Medley, Mullens, Therkildsen, Undercoffer, Wise, Filippo, and Perko (“Individual Defendants”) were employees of Plaintiff. The Individual Defendants no longer work for Plaintiff. (FAC, ¶¶ 2-8.) Plaintiff is a “construction company that installs, fabricates, and maintains HVAC and plumbing systems.” (FAC, ¶ 13.) Each of the Individual Defendants signed an Employee Handbook which contained language regarding the handling of Plaintiff’s confidential information. (FAC, ¶¶ 13-18.)

Plaintiff alleges that Defendant Medley formulated a scheme to wrongfully appropriate both tangible and intangible property of Plaintiff in order to start a competing business. (FAC, ¶ 24.) Plaintiff further alleges that each of the Individual Defendants agreed to

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

24CV024763: AIR SYSTEMS SERVICE & CONSTRUCTION, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY vs MEDLEY, et al. 12/11/2025 Hearing on Demurrer to Plaintiff's First Amended Complaint in Department 53

participate in this scheme in some way, with all but Defendants Perko and Medley promptly becoming employees of Defendant THP Mechanical LLC (“THP”) after leaving Plaintiff’s employ. (FAC, ¶¶ 25, 26.) Plaintiff alleges that THP offers the same services as Plaintiff using property taken from Plaintiff and has targeting Plaintiff’s existing customers in order to grow its business. (FAC, ¶¶ 27, 28.) Despite signing a nondisclosure agreement, Plaintiff alleges that Defendants Medley, Undercoffer, Mullens, and Fillipo each made efforts to recruit Plaintiff’s employees to work at THP. (FAC, ¶ 30.)

Plaintiff alleges that the Individual Defendants wrongfully appropriated the following material:

 Plaintiff alleges that Defendant Medley retained significant material belonging to Plaintiff, including “business plans, lists of employees and their salaries, financial statements, and an estimating guide maintained by Air Systems,” which include Plaintiff’s trade secrets. (FAC, ¶¶ 31, 32.) Before leaving Plaintiff’s employ, Defendant Therkildsen obtained more than 72 GB of data from Plaintiff’s system, including trade secret and confidential data, specifically for the purpose of use by THP. (FAC, ¶¶ 33-38.)

Similarly, Defendant Undercoffer transferred a number of files to an external hard drive from his work computer before leaving his employment with Plaintiff, specifically for use by THP. (FAC, ¶¶ 48-51.)  Plaintiff alleges that Defendant Medley fraudulently induced Plaintiff to develop an estimate for a fraudulent company, specifically to obtain an estimate, which THP later utilized to bid on another project. (FAC, ¶¶ 54-59.) Plaintiff alleges that Defendant Mullens further sabotaged Plaintiff’s business prior to leaving Plaintiff’s employ by installing the incorrect software for HVAC management, despite express instructions not to utilize that software; by withholding necessary information relating to the controls of another project; by providing confidential bid information to THP; and by failing to pursue new leads for business on behalf of Plaintiff, instead directing those leads to THP. (FAC, ¶¶ 60-73.)  Plaintiff alleges that Defendant Undercoffer stole tools belonging to Plaintiff, including but “not limited to, hammer drills, hole saws, portable air inflators, and cordless reciprocating saws.” (FAC, ¶ 74.)

Plaintiff believes these tools were taken to THP, who is now using said tools in the course of business. (FAC, ¶ 76.)  Plaintiff alleges that Defendants Filippo, Mullens, and Therkildsen copied software licensed by Plaintiff, for use by THP. (FAC, ¶¶ 83-87.)

The FAC alleges causes of action for: (1) Trade Secret Misappropriation; (2) Violation of

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

24CV024763: AIR SYSTEMS SERVICE & CONSTRUCTION, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY vs MEDLEY, et al. 12/11/2025 Hearing on Demurrer to Plaintiff's First Amended Complaint in Department 53

Penal Code Section 502; (3) Tortious Interference with Contract; (4) Conversion; (5) Tortious Interference with Prospective Economic Advantage; (6) Fraud; (7) Breach of Contract; (8) Fraud; (9) Quantum Meruit; (10) Violation of the Unfair Competition Law; (11) Breach of Duty of Loyalty; and (12) Aiding and Abetting Breach of Duty of Loyalty.

Defendants demur to causes of action 2, 5, 6, 8, 11, and 12 for failure to state sufficient facts. Plaintiff opposes.

Legal Standard

The function of a demurrer is to test the sufficiency of the pleading it challenges by raising questions of law. (Salimi v. State Comp. Ins. Fund (1997) 54 Cal.App.4th 216, 219; Nordlinger v. Lynch (1990) 225 Cal.App.3d 1259, 1271.)

A demurrer “tests the pleadings alone and not the evidence or other extrinsic matters.” (SKF Farms v. Superior Court (1984) 153 Cal.App.3d 902, 905.) The purpose of a demurrer is to test the legal sufficiency of a claim. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) For the purpose of determining the effect of a complaint, its allegations are liberally construed, with a view toward substantial justice. (Code Civ. Proc. §452; Amarel v. Connell (1988) 202 Cal.App.3d 137, 140-141; Quelimane Co. v.

Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 43, fn. 7.) In this respect, the Court treats the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law, and considers matters which may be judicially noticed. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318; Poseidon Development, Inc. v. Woodland Lane Estates, LLC (2007) 152 Cal.App.4th 1106, 1111- 1112.) A general demurrer does not admit contentions, deductions, or conclusions of fact or law alleged in the complaint; facts impossible in law; or allegations contrary to facts of which a court may take judicial notice. (Blank, supra, 39 Cal.3d at p. 318; William S.

Hart Union High School Dist. v. Regional Planning Com. (1991) 226 Cal.App.3d 1612, 1616, fn. 2.)

A demurrer may be sustained only if the complaint lacks any sufficient allegations to entitle the plaintiff to relief. (Financial Corp. of America v. Wilburn (1987) 189 Cal.App.3d 764, 778.) “Plaintiff need only plead facts showing that he may be entitled to some relief . . . we are not concerned with plaintiff's possible inability or difficulty in proving the allegations of the complaint.” (Highlanders, Inc. v. Olsan (1978) 77 Cal.App.3d 690, 696-697.) “[Courts] are required to construe the complaint liberally to determine whether a cause of action has been stated, given the assumed truth of the facts pleaded.” (Picton v. Anderson Union High School Dist. (1996) 50 Cal.App.4th 726.) A demurrer admits the truth of all material facts properly pled and the sole issue

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

24CV024763: AIR SYSTEMS SERVICE & CONSTRUCTION, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY vs MEDLEY, et al. 12/11/2025 Hearing on Demurrer to Plaintiff's First Amended Complaint in Department 53

raised by a general demurrer is whether the facts pled state a valid cause of action – not whether they are true. (Serrano v. Priest (1971) 5 Cal.3d 584, 591.)

Discussion

Causes of Action Two (Violation of Penal Code Section 502), Five (Tortious Interference with Prospective Economic Advantage), and Eleven (Breach of Duty of Loyalty)

Defendants argue that Plaintiff’s second, fifth, and eleventh causes of action are superseded by the California Uniform Trade Secrets Act (“CUTSA”), as CUTSA is the exclusive civil remedy for the type of conduct described in the Complaint. Plaintiff opposes, arguing that CUTSA does not supersede these causes of action because the second, fifth, and eleventh causes of action are not premised on the wrongful taking or use of confidential information.

Pursuant to Civil Code section 3426.1, a “trade secret” means “information, including a formula, pattern, compilation, program, device, method, technique, or process, that:

(1) Derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and

(2) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

(Civil Code § 3426.1(d).)

Defendants cite to, inter alia, Silvaco Data Systems, Inc. v. Intel Corp. (2010) 184 Cal.App.4th 210; Mattel, Inc. v. MGA Entm’t, Inc. Consol. Actions (C.D. Cal. 2010) 782 F. Supp. 2d 911, 987; and Waymo LLC v. Uber Techs., Inc. (N.D. Cal. 2017) 256 F. Supp.3d 1059, to support their argument that the CUTSA preempts all of Plaintiff's causes of action.

In Silvaco, the Sixth District Court of Appeal held that “CUTSA provides the exclusive civil remedy for conduct falling within its terms, so as to supersede other civil remedies 'based upon misappropriation of a trade secret.'” (Silvaco Data Systems, Inc., supra, 184 Cal.App.4th at 235.) The court then explained that the question must be whether the claims fall within this description. The court held that the conversion, common count, common law unfair business practices, and misrepresentation causes of action in that

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

24CV024763: AIR SYSTEMS SERVICE & CONSTRUCTION, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY vs MEDLEY, et al. 12/11/2025 Hearing on Demurrer to Plaintiff's First Amended Complaint in Department 53

case fell within the CUTSA as they were predicated on Intel's conduct in obtaining CSI's software containing Silvaco's trade secrets, and that Intel lied about its continuing use of the code. (Id., at 236.)

In Mattel, the Court explained that CUTSA “implicitly preempts alternative civil remedies based on trade secret misappropriation,” but “does not supersede ‘(1) contractual remedies, whether or not based upon misappropriation of a trade secret, [and] (2) other civil remedies that are not based upon misappropriation of a trade secret.’” (Mattel, Inc. v. MGA Entm’t, Inc. Consol. Actions, supra, 782 F. Supp. 2d at p. 987.)

In Waymo, the plaintiff alleged that the defendant had misappropriated its trade secrets. Specifically, one of plaintiff's employees, downloaded “9.7 GBs of sensitive, secret, and valuable internal Waymo information,” including “confidential information regarding Waymo's LiDAR systems and other technology.” (Waymo LLC, supra, 256 F. Supp.3d at 1061.) The employee then left plaintiff's employ, and started his own competing business. Defendant Uber acquired the business. The district court granted Uber's motion to dismiss the Business and Professions Code section 17200 claim on the ground that it was superseded by CUTSA.

The Court notes that while Defendants rely upon Mattel and Waymo, both cases are federal trial court decisions neither of which are binding upon this Court.

In any event, in both Silvaco (which is binding California authority) and Waymo, the alleged trade secrets fell within the definition of “trade secrets” in the CUTSA. The question, therefore, is whether Plaintiff’s causes of action are based purely on a misappropriation of trade secrets. The Court will review each cause of action below.

Second Cause of Action for Violation of Penal Code section 502

Plaintiff’s second cause of action for violation of Penal Code section 502 alleges that Defendant Therkildsen created a zip file containing 78,684 files copied from Plaintiff’s servers. (FAC, ¶ 33.) On January 7, 2024, Defendant Therkildsen created a link which would allow this file to be downloaded remotely. (FAC, ¶ 35.) The file was downloaded on January 7, 2024; March 18, 2024; and March 24, 2024. Plaintiff believes the file was downloaded by Defendants Mullens and Medley. (FAC, ¶ 37.)

Defendants argue that, as in Silvaco, Plaintiff alleges that Defendants have improperly taken computer files which contain, among other things, Plaintiff’s trade secret materials, and thus the cause of action is similarly superseded by CUTSA. Plaintiff argues that the cause of action is not preempted by CUTSA because there are “facts

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

24CV024763: AIR SYSTEMS SERVICE & CONSTRUCTION, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY vs MEDLEY, et al. 12/11/2025 Hearing on Demurrer to Plaintiff's First Amended Complaint in Department 53

other than misappropriation [that] are sufficient to constitute a cause of action,” citing to allegations that Defendants “misused Plaintiff’s electronic infrastructure.” (Opp., pp. 12:1; 14:3-4.) Plaintiff cites to Angelica Textile Services, Inc. v. Park (2013) 220 Cal.App.4th 495 for the premise that CUTSA “does not displace noncontract claims that, although related to a trade secret misappropriation, are independent and based on facts distinct from the facts that support the misappropriation claim.” (Id., at p. 508.)

In Angelica Textile Services, the Court explained that where a cause of action has “a basis independent of any misappropriation of a trade secret,” it is not preempted by CUTSA. (Ibid.)

With regard to Plaintiff’s claim for Violation of Penal Code section 502, the wrongful act described in Penal Code section 502 includes where a party “Knowingly accesses and without permission takes, copies, or makes use of any data from a computer, computer system, or computer network, or takes or copies any supporting documentation, whether existing or residing internal or external to a computer, computer system, or computer network.” (Penal Code § 502(c)(2).) Therefore, it is the taking of data from Plaintiff’s computer system, regardless of trade secret designation, which constitutes a violation of Penal Code section 502. Further, as noted by Defendants, Plaintiff does not allege that all 78,684 of the files taken constitute trade secret information.

The Court finds that Plaintiff has alleged an independent cause of action for violation of Penal Code section 502, separate from Plaintiff’s claim for trade secret misappropriation. Accordingly, the Court finds CUTSA does not preempt Plaintiff’s section 502 cause of action. The demurrer on this ground is OVERRULED.

The Court next addresses Defendants’ argument that Defendants’ alleged actions do not constitute “access” for purposes of a section 502 violation.

Penal Code section 502 Subdivision (c), subsections (2) and (4) read, in pertinent part:

(c) Except as provided in subdivision (h), any person who commits any of the following acts is guilty of a public offense:

(2) Knowingly accesses and without permission takes, copies, or makes use of any data from a computer, computer system, or computer network, or takes or copies any supporting documentation, whether existing or residing internal or external to a computer, computer system, or computer network.

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

24CV024763: AIR SYSTEMS SERVICE & CONSTRUCTION, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY vs MEDLEY, et al. 12/11/2025 Hearing on Demurrer to Plaintiff's First Amended Complaint in Department 53

(4) Knowingly accesses and without permission adds, alters, damages, deletes, or destroys any data, computer software, or computer programs which reside or exist internal or external to a computer, computer system, or computer network.

(Pen. Code §§ 502(c)(2); (c)(4).)

In arguing the allegations do not constitute “access” for purposes of a section 502 violation, Defendants point to the definition contained in section 502, subdivision (b), subsection (1): “’Access' means to gain entry to, instruct, cause input to, cause output from, cause data processing with, or communicate with, the logical, arithmetical, or memory function resources of a computer, computer system, or computer network.” (Pen. Code § 502(b)(1).) Defendants also cite to Chrisman v. City of Los Angeles (2007) 155 Cal.App.4th 29, arguing the Second District Court of Appeal has held “there was no liability under Penal Code § 502(c) for an individual who was authorized to access a computer system but did so for an unauthorized purpose.” (Demurrer 13:3-5.)

Defendants next argue that Plaintiff has failed to sufficiently state a claim for violation of Penal Code 502, because Plaintiff alleges that Defendant Therkildsen accessed the files in the scope of her employment with Plaintiff, citing to Chrisman v. City of Los Angeles (2007) 155 Cal.App.4th 29. The Court in Chrisman explained that the purpose of section 502 was “to deter and punish ... browsers and hackers” from breaking into a computer system in order to obtain the information contained therein. (Id., at p. 34.) The Chrisman court further explains that accessing computer files within the scope of one’s employment cannot form the basis of a Penal Code section 502 claim, as “an employer's disapproval of an employee's conduct does not cast the conduct outside the scope of employment.” (Id., at p. 37.)

In Chrisman, a former police officer was terminated for misusing his department computer. (Chrisman, supra, 155 Cal.App. at p. 29.) The misuse consisted of unauthorized system searches while on duty regarding individuals he had no legitimate reason to investigate. Respondents argued the officer had violated Section 502, subd. (c)(7) with his “non-work-related computer inquiries.” (Id. at 33.) The Court of Appeal held the officer's actions did not constitute unauthorized access pursuant to Penal Code section 502, subd. (b)(1) because Subd.(c)(7) did not apply to the officer's misuse of department computers. Rather, subd.(b)(1) “defines 'access' in terms redolent of 'hacking' or breaking into a computer.” (Ibid.)

As a preliminary matter, the Court notes that although Plaintiff’s second cause of action

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

24CV024763: AIR SYSTEMS SERVICE & CONSTRUCTION, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY vs MEDLEY, et al. 12/11/2025 Hearing on Demurrer to Plaintiff's First Amended Complaint in Department 53

incorporates the preceding paragraphs 1 through 106 of the FAC, which include the allegations pertaining to Defendant Undercoffer’s alleged transfer of files from his work computer to an external hard drive, Plaintiff specifically alleges that its second cause of action is based upon the Therkildsen file and makes no mention of the so-called “Undercoffer Drive.” (See FAC ¶¶ 125-136.) Further, Plaintiff’s opposition appears to concede the same.

In this case, as in Chrisman, Defendant Therkildsen was allegedly employed by Plaintiff at the time she accessed the information at issue, and thus was lawfully permitted to do so. Despite Plaintiff's allegation that Defendant Therkildsen used the information in a manner she was unauthorized to do, the misuse does not constitute “access” for the purposes of a Section 502 claim, pursuant to the holding in Chrisman. The Court is not persuaded by Plaintiff’s citations to People v. Childs (2013) 220 Cal.App.4th 1079, 1105-1107, in which the court explained that section 502 may apply to employees under some circumstances.

The court in Childs involved an employee refusing to provide passwords to a key system, intentionally configuring the system so that he was the only employee able to maintain the system. The court ultimately found that “The misuse of a employer's computer to make searches without any work-related purpose is not remotely comparable to the computer lockout that Childs accomplished as system administrator of the FiberWAN network.” (Id., at p. 1106.)

Here, Defendant Therkildsen’s downloading of certain files which she was permitted to access during the course of her employment is much more akin to the circumstances in Chrisman which similarly involved improper access to computer files, as opposed to the facts of Childs, where the defendant in question systematically altered the computer network.

Accordingly, the demurrer must be SUSTAINED on this ground.

Fifth Cause of Action for Tortious Interference with Prospective Economic Advantage

Defendants argue that Plaintiff’s cause of action for tortious interference is superseded by CUTSA because it relies upon the same nucleus of facts as Plaintiff’s CUTSA claim and that the remaining alleges are insufficient to give rise to a claim for tortious interference.

“Intentional interference with prospective economic advantage has five elements:(1) the existence, between the plaintiff and some third party, of an economic relationship that contains the probability of future economic benefit to the plaintiff; (2) the defendant’s

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

24CV024763: AIR SYSTEMS SERVICE & CONSTRUCTION, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY vs MEDLEY, et al. 12/11/2025 Hearing on Demurrer to Plaintiff's First Amended Complaint in Department 53

knowledge of the relationship; (3) intentionally wrongful acts designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm proximately caused by the defendant’s action.” (Roy Allan Slurry Seal, Inc. v. American Asphalt South, Inc. (2017) 2 Cal.5th 505, 512.)

The FAC alleges that:

Defendants have intentionally induced clients of the Air Systems Business to terminate their relationship with Air Systems by either not renewing their contracts with Air Systems and contracting with THP, a competing business or by, as in the case of the Duct Project, directing work that the client would otherwise have given to Air Systems to THP.

Defendants’ conduct as herein alleged (a) was undertaken in furtherance of the Competing Business Scheme and (b) is wrongful in that THP’s business is made possible and is operated through the wrongful conduct as alleged herein, including, but not limited to, the misappropriation of the Trade Secrets, downloading of the Controls Software, the conversion of the Tools, and the withholding of the Internal Leads.

(FAC, ¶¶ 159-160.)

The FAC further alleges that Defendants acted with knowledge of Plaintiff’s economic relationship with these clients, with the intent of depriving Plaintiff of future economic benefits, and that Plaintiff has suffered actual disruption of such relationships and the diminishment of profits as a result. (FAC, ¶¶ 158-163.)

The mere fact that a Plaintiff asserts a claim for trade secret misappropriation does not preclude Plaintiff from pursuing claims based on other wrongful behavior that does not constitute trade secret misappropriation. Where defendants are alleged to have engaged in some behavior that violates CUTSA and other wrongful behavior that does not involve misappropriation of trade secrets, a plaintiff is only precluded from relying on the evidence of trade-secret misappropriation to support the non-CUTSA based causes of action. Thus, the question is not whether Plaintiff's fifth cause of action has been contaminated by allegation related to trade secret misappropriation, but whether Plaintiff has alleged sufficient other facts to support those causes of action.

As with Plaintiff’s claim for violation of Penal Code section 502, Plaintiff’s cause of action for tortious interference has “a basis independent of any misappropriation of a trade secret,” and thus is not preempted by CUTSA. (Angelica Textile Services, supra,

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

24CV024763: AIR SYSTEMS SERVICE & CONSTRUCTION, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY vs MEDLEY, et al. 12/11/2025 Hearing on Demurrer to Plaintiff's First Amended Complaint in Department 53

220 Cal.App.4th at p. 508.) While Plaintiff does allege that Defendants’ purported misappropriation of trade secrets assisted in Defendants’ tortious interference with prospective economic advantage, Plaintiff further alleges that Defendants intentionally induced Plaintiff’s clients to move to Defendants’ new business. Defendants do not argue that these allegations are based on the use of trade secret information and make no effort to explain why these facts would be insufficient to support the challenged causes of action (other than to argue that all allegations “are premised on the wrongful taking and use of confidential business and proprietary information.”) Thus, the Court finds the FAC includes sufficient factual allegations of behavior that is not based on trade-secret misappropriation to support the fifth cause of action for tortious interference.

Accordingly, Defendants’ demurrer to the fifth cause of action is OVERRULED.

Eleventh Cause of Action for Breach of Duty of Loyalty

Defendants next argue that Plaintiff’s claim for breach of the duty of loyalty is precluded by CUTSA, because it arises out of the same nucleus of fact as Plaintiff’s CUTSA claim.

“Every agent owes his principal the duty of undivided loyalty. During the course of his agency, he may not undertake or participate in activities adverse to the interests of his principal. In the absence of an agreement to the contrary, an agent is free to engage in competition with his principal after termination of his employment but he may plan and develop his competitive enterprise during the course of his agency only where the particular activity engaged in is not against the best interests of his principal.” (Sequoia Vacuum Systems v. Stransky (1964) 229 Cal.App.2d 281, 287.)

The FAC alleges:

Therkildsen breached her duty of loyalty to Air Systems by using her position as the manager of the Controls Department to (a) assemble and exfiltrate the Therkildsen File (including, but not limited to, the TF Trade Secrets) and the Bid Information to, among others, herself, Medley, and Mullens for use by THP, a competing business; (b) retain the Internal Leads and use them for the benefit of THP, a competing business; and (c) assemble and distribute the Therkildsen File in contravention of Air Systems’s rights and obligations, including, but not limited to Air Systems’s rights and obligations stemming from its agreements with its software vendors.

(FAC, ¶ 213.)

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

24CV024763: AIR SYSTEMS SERVICE & CONSTRUCTION, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY vs MEDLEY, et al. 12/11/2025 Hearing on Demurrer to Plaintiff's First Amended Complaint in Department 53

Each of the grounds for the eleventh cause of action arises out of the misappropriation of trade secrets, with the exception of Plaintiff’s allegations that Defendant Therkildsen retained “internal leads” for use by THP. Therefore, the question before the Court here is whether Plaintiff’s allegations regarding these “internal leads” are sufficient alone to give rise to a cause of action for breach of the duty of loyalty.

With regard to these internal leads, the FAC alleges:

Air Systems is informed and believes, and based thereon alleges that Mullens and Therkildsen, and each of them, during a period beginning in or around December 2023 and ending with their departure from Air Systems, would not pursue leads for new business for Air Systems’s Controls Department that Mullens and Therkildsen received from other Air Systems employees (the “Internal Leads”). Instead, Air Systems is informed and believes, and based thereon alleges that Mullens and Therkildsen, and each of them, saved the Internal Leads with the intention of using the Internal Leads for the benefit of THP. Air System is further informed and believes, and based thereon alleges that the Internal Leads are now being used by THP in its business and that Mullens and Therkildsen, among other individuals, are now using the Internal Leads in the course of their employment with THP.

(FAC, ¶ 73.)

The Court finds that these allegations are sufficient at the pleading stage to allege a claim for breach of the duty of loyalty. Plaintiff has stated a claim separate from its allegations of trade secret misappropriation.

Therefore, Defendants’ demurrer is OVERRULED as to the eleventh cause of action for breach of the duty of loyalty.

Sixth and Eighth Causes of Action for Fraud

Defendants argue that Plaintiff fails to sufficiently state a claim for fraud in either its sixth or eighth causes of action, as both rely on the civil conspiracy doctrine to hold each Defendant liable for the actions of the others. Notably, while nearly all of Plaintiff’s causes of action include allegations of civil conspiracy as to extend liability to each Individual Defendant under those causes of action (see e.g., FAC ¶¶ 113, 134, 145, 154, 163), Defendants demur only to the sixth and eighth causes of action on grounds that the conspiracy allegations contained therein are insufficient to allege conspiracy

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

24CV024763: AIR SYSTEMS SERVICE & CONSTRUCTION, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY vs MEDLEY, et al. 12/11/2025 Hearing on Demurrer to Plaintiff's First Amended Complaint in Department 53

liability as to each Individual Defendant based upon fraud.

“Conspiracy is not a cause of action, but a legal doctrine that imposes liability on persons who, although not actually committing a tort themselves, share with the immediate tortfeasors a common plan or design in its perpetration. [Citation.] By participation in a civil conspiracy, a coconspirator effectively adopts as his or her own the torts of other coconspirators within the ambit of the conspiracy. [Citation.] In this way, a coconspirator incurs tort liability co-equal with the immediate tortfeasors.” (Applied Equip. Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 510-11.) Simply stated, civil conspiracy by itself is not actionable: “[i]t must be activated by the commission of an actual tort.” (Id., at 511.)

“[I]n order to state a cause of action based upon a conspiracy theory the plaintiff must allege the formation and operation of the conspiracy, the wrongful act or acts done pursuant to it, and the damage resulting from such acts. [Citation.] In making such allegations[,] bare legal conclusions, inferences, generalities, presumptions, and conclusions are insufficient. [Citation.]” (State of California ex rel. Metz v. CCC Information Services, Inc. (2007) 149 Cal.App.4th 402, 419.) And where fraud is alleged to be the object of the conspiracy, the claim must be pleaded with particularity. (Favila v. Katten Muchin Rosenman LLP (2010) 188 Cal.App.4th 189, 211.) The plaintiff must plead “facts which show how, when, where, to whom, and by what means the representations were tendered.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.)

Plaintiff’s sixth cause of action alleges:

As part of the Release, Medley represented and warranted that he had returned to Air Systems “all property and documents of [Air Systems] in his possession.”

Air Systems is informed and believes and based thereon alleges that this representation was false, in that, at the time he executed the Release, Medley had failed to return the Retained Materials, still possessed the Retained Materials, and knew that he had both failed to return and still possessed the Retained Materials.

(FAC, ¶¶ 169, 170.)

Plaintiff’s eighth cause of action alleges:

Medley, purportedly on behalf of CMJ, represented to Air Systems, that if Air Systems put together an estimate of the HVAC, Plumbing, and Controls

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

24CV024763: AIR SYSTEMS SERVICE & CONSTRUCTION, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY vs MEDLEY, et al. 12/11/2025 Hearing on Demurrer to Plaintiff's First Amended Complaint in Department 53

component of the Project, CMJ would, if it won the bid for the Project, subcontract the HVAC, Plumbing, and Controls component of the Project to Air Systems.

Air Systems is informed and believes and based thereon alleges that this representation was false, and that Medley and THP always intended that THP (or another entity established by Medley as part of the Competing Business Scheme) would perform any HVAC, Plumbing, and/or Controls work on the Project if THP won the bid for the Project.

(FAC, ¶¶ 186, 187.)

With regard to conspiracy as to each individual Defendant, Plaintiff’s sixth and eighth causes of action allege:

Air Systems is informed and believes and based thereon alleges that in participating in the Competing Business Scheme as herein alleged, the Individual Defendants, and each of them, entered into the conspiracy and committed certain of the wrongful acts alleged herein prior to the establishment of THP and prior to that Individual Defendant joining THP. Air Systems is informed and believes and based thereon alleges that (a) each of the Individual Defendants entered into the conspiracy and committed certain of the wrongful acts alleged herein prior to the particular Individual Defendant becoming an employee of THP and (b) each of the Individuals entered into the conspiracy and committed the wrongful acts alleged herein for their individual advantage.

(FAC, ¶¶ 176, 193.)

Plaintiff’s allegations of conspiracy fail to meet the standards set forth above. Paragraphs 176 and 193 contain the only allegations in support of Plaintiff’s claims of conspiracy as to each individual Defendant pertaining to the sixth and eighth causes of action respectively.

While each cause of action alleges a specific alleged fraud by Defendant Medley, the allegations fail to include more than the barest details (i.e., “how, when, where, to whom, and by what means the representations were tendered”) necessary to establish the underlying fraud/misrepresentation without which there can be no actionable conspiracy. Further, allegations of conspiracy generically allege that all Defendants committed certain of the wrongful acts without specifically describing what each Defendant, separate and distinct from the others, is alleged to have done.

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

24CV024763: AIR SYSTEMS SERVICE & CONSTRUCTION, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY vs MEDLEY, et al. 12/11/2025 Hearing on Demurrer to Plaintiff's First Amended Complaint in Department 53

Such vague and non-specific allegations fall short of the heightened pleading standard which governs all fraud claims.

Consequently, the demurrer as to the sixth and eighth causes of action is SUSTAINED.

Twelfth Cause of Action for Aiding and Abetting Breach of Duty of Loyalty

Finally, Defendants argue that Plaintiff fails to sufficiently allege a cause of action against Defendant Perko for aiding and abetting the breach of duty of loyalty. Defendants argue that Plaintiff fails to allege any actions made by Defendant Perko in support of this cause of action. In opposition, Plaintiff argues that the “facts alleged in the FAC establish the reasonable inference that Perko (i) knew of the breaches of fiduciary duty and (ii) substantially assisted in causing those breaches.” (Opp., p. 22:15- 17.)

“The elements of a claim for aiding and abetting a breach of fiduciary duty are: (1) a third party’s breach of fiduciary duties owed to plaintiff; (2) defendant’s actual knowledge of that breach of fiduciary duties; (3) substantial assistance or encouragement by defendant to the third party’s breach; and (4) defendant’s conduct was a substantial factor in causing harm to plaintiff.” (Nasrawi v. Buck Consultants LLC (2014) 231 Cal.App.4th 328, 343.)

Plaintiff cites to allegations in the FAC which state that Defendant Perko was an employee of Plaintiff until he purportedly retired, but now works for THP in a manager capacity. (FAC, ¶¶ 8, 9.) Plaintiff further alleges that Defendant Perko used material wrongfully taken from Plaintiff in the course of his employment with THP, and that his participation in the scheme by Defendants is demonstrated by his position with THP and his knowledge of Plaintiff’s operations. (FAC, ¶¶ 103, 104.)

The Court finds these allegations to be insufficient to support a cause of action for aiding and abetting a breach of fiduciary duty against Defendant Perko. Plaintiff has not sufficiently established the elements of a claim for aiding and abetting based on the limited allegations pertaining to Defendant Perko found in the FAC.

Accordingly, the demurrer is SUSTAINED as to the twelfth cause of action for aiding and abetting the breach of duty of loyalty, specifically as to Defendant Perko.

Disposition

Based on the foregoing, Defendants’ demurrer is SUSTAINED as to causes of action

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

24CV024763: AIR SYSTEMS SERVICE & CONSTRUCTION, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY vs MEDLEY, et al. 12/11/2025 Hearing on Demurrer to Plaintiff's First Amended Complaint in Department 53

nos. 2, 6, 8, and 12 (as to Defendant Perko); and OVERULED as to causes of action nos. 5, and 11.

Where sustained, the Plaintiff is granted leave to amend.

Plaintiff may file and serve an amended complaint no later than December 22, 2025. Although not required by statute or court rule, Plaintiff is directed to present the clerk a copy of this ruling at the time of filing the Second Amended Complaint. Defendant may file and serve a response within 30 days of service of the Second Amended Complaint, 35 days if served by mail.

The minute order is effective immediately. No formal order pursuant to California Rules of Court, rule 3.1312 or further notice is required.