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

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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 BETTER
MORTGAGE CO. (ECF No. 84)
DANIEL HORANYI and JEANETTE
LEE.,
Counterclaimants,
v.
LUMINATE HOME LOANS, INC.,
Counterclaim Defendant.
Pending before the Court is a motion to dismiss (ECF No. 84) submitted by Luminate
Home Loans, Inc. (“Luminate”), Taryn Reuter (“Reuter”), Courtney Nuness (“Nuness”),
and Mike Pelham (“Pelham”) (collectively, “Counter-Defendants”) to strike counterclaims
submitted by Counter-Plaintiff Better Mortgage Co. (“Better”) (ECF No. 81).
For the reasons below, the Court GRANTS IN PART and DENIES IN PART the
motion to dismiss. (ECF No. 84.)
I. 	BACKGROUND
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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. 81 ¶¶ 2, 4.) 	In October 2024, Luminate announced that, for
business reasons, it would be shuttering the approximately 300-person NEO division by
February 2025. (Id. ¶ 3.) In anticipation of the shut-down, Luminate terminated several
senior employees in its NEO division and allegedly structured a deal with Better to finalize
the term of a deal under which all of NEO would move to Better. (Id. ¶ 3.)
As part of the deal, Luminate allegedly worked with NEO employees who remained
affiliated with Luminate to pull together lists of NEO personnel who would transition to
Better and other assets developed in the NEO division to facilitate the transition to Better.
(Id. ¶ 4.) 	Materials also included certain branch leases and technology details for the
individual branches transitioning to Better. 	(Id. ¶ 4.) 	In or around November 2024,
Luminate allegedly reversed course and began to interfere with, and seek to halt, NEO’s
transition to Better—recording NEO employees, discouraging former NEO employees to
join Better, and converting NEO property. (Id. ¶ 5.)
Better claims NEO is a separate company from either Luminate or Better; and that
NEO has never sold its intellectual property rights to any other company. (Id. ¶¶ 20-23.)
NEO’s trademark is allegedly licensed to Better, despite Luminate’s continued use. (Id. ¶
6.)
On December 2, 2024, Luminate initiated this action against multiple defendants,
including Better. (ECF No. 1.) Better filed the operative amended counterclaims against
Counter-Defendants for the following causes of action (ECF No. 81):
1. Count I: Intentional Interference with Contractual Relations (id. ¶¶ 112–117);
2. Count II: Intentional Interference with Economic Relations (id. ¶¶ 118–125);
3. Count III: Negligent Interference with Prospective Economic Relations (id. ¶¶
126–133);
4. Count IV: Violation of California Penal Code § 502 (id. ¶¶ 134–144);
5. Count V: Invasion of Privacy, California Penal Code § 632 (id. ¶¶ 145–152);
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6. Count VI: Civil Conspiracy (id. ¶¶ 153–157);
7. Count VII: Violation of the Lanham Act (15 U.S.C. § 1125(a)) (id. ¶¶ 158–165);
8. Count VIII: Trademark Infringement (id. ¶¶ 166–172); and
9. Count IX: Unfair Competition (id. ¶¶ 173–180).
Counter-Defendants moved to dismiss Better’s amended counterclaims for Counts
I, II, III, IV, V, VI, and IX. 	(ECF No. 84.) 	Better filed an opposition to Counter-
Defendants’ motion to dismiss. (ECF No. 93.) Counter-Defendants then filed a response
in support of their motion to dismiss. (ECF No. 102).
The Court finds Counter-Defendants’ motion to dismiss (ECF No. 84) 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 Anti-SLAPP Statute (Cal. Civ. Proc. Code § 425.16)
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
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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).
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).
“[The anti-SLAPP movant’s] first task is to make a prima facie showing that each
cause of action against him “aris[es] from” activity he took “in furtherance” of his right to
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 Counter-Defendants do 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).
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petition or free speech.” Safari Club Int'l v. Rudolph, 862 F.3d 1113, 1120 (9th Cir. 2017)
(citing Cal. Civ. Proc. Code § 425.16(b)(1)). 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,” “under consideration or
review by a . . . judicial body,” or “any other conduct in furtherance of the exercise of the
constitutional right of petition or the constitutional right of free speech in connection with
a public issue or an issue of public interest.” See Cal. Civ. Proc. Code § 425.16(e)(1)-(2),
(4).
Here, Counter-Defendants move to dismiss Count IV (Violation of California Penal
Code § 502 (ECF No. 81 ¶¶ 134–144)) and Count V (Invasion of Privacy, California Penal
Code § 632 (id. ECF No. 81 ¶¶ 145–152)) of Better’s amended counterclaims as barred by
anti-SLAPP protections. 	In both Counts IV and V, Better bases its claims on Counter-
Defendants’ use of software to make unauthorized recordings of Better’s conversations
with NEO employees. (See id. ¶¶ 134–152.)
Counter-Defendants advance two separate theories that Counts IV and V “arise
from” protected activity: (1) Counts IV and V are based on Counter-Defendants’
declaration filed in court, § 425.16(e)(1)-(2); and (2) Counts IV and V are based on
Counter-Defendants’ recording which was part of Counter-Defendants’ “pre-litigation
investigation,” § 425.16(e)(4). (See ECF No. 84 at 10:10–12:1.)
First, the act of recording is distinct from Counter-Defendants’ use of that recording
to create its court-filed declaration. 	Under 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)); see also Biden v. Ziegler, 737 F. Supp. 3d
958, 977 (C.D. Cal. 2024). However, Better does not challenge Counter-Defendants’ filing
of the Pelham Declaration in court. Better instead challenges Counter-Defendants’ use of
software to record Better’s conversations itself—which happens to be documented in the
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Pelham Declaration (ECF No. 81 ¶¶ 134–152). See Park v. Bd. of Trs. of California State
Univ., 2 Cal. 5th 1057, 1060 (2017) (“[A] claim may be struck only if the speech or
petitioning activity itself is the wrong complained of, and not just evidence of liability or a
step leading to some different act for which liability is asserted”). 	Thus, the Court finds
Counts IV and V do not arise from protected activity as defined by Cal. Civ. Proc. Code §
425.16(e)(1)-(2).
Second, 	accepting 	that 	Counter-Defendants’ 	allegedly 	unauthorized 	recording
(rather than use of that recording in the Pelham Declaration) could be the challenged
conduct, Counter-Defendants assert that Counts IV and V should qualify as protected
activity under § 425.16(e)(4) as “conduct in furtherance of the exercise of the constitutional
right of petition” because the recording was part of Counter-Defendants’ “pre-litigation
investigation.” (ECF No. 84 at 10:10–12:1.) The “right to petition” includes the “filing of
a lawsuit, as well as conduct ‘incidental to the prosecution of the suit’.” 	See Gamble v.
Kaiser Found. Health Plan, Inc., 348 F. Supp. 3d 1003, 1027 (N.D. Cal. 2018) (citing
several Ninth Circuit cases). “[P]relitigation investigation to support a potential claim is
sufficiently related to the right to petition as to fall within the protected ‘breathing space’
of that right.” 	Tichinin v. City of Morgan Hill, 177 Cal. App. 4th 1049, 1071 (2009).
Importantly, “whether [prelitigation investigation] does in a particular case [fall within
protected activity] further depends on whether the potential claim being investigated was
legitimate or a sham.” Id; see also Gamble, 348 F. Supp. 3d at 1027. Counter-Defendants
do not specify what potential claims they sought to investigate with their allegedly unlawful
recording. 	(ECF No. 84 at 10:10–12:1.) 	Thus, the Court cannot determine whether the
potential claims being investigated were legitimate, and whether Counter-Defendants’
investigation should be protected by the right to petition. As such, the Court finds Counter-
Defendants have not met their burden to demonstrate that Counts IV and V arise from
protected activity as defined by § 425.16(e)(4).
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Accordingly, the Court DENIES Counter-Defendants’ motion to dismiss (ECF No.
84) Better’s amended counterclaims in Counts IV and V (ECF No. 81 ¶¶ 134–152) on the
basis they are barred by anti-SLAPP protections.
B. 	Tortious Interference
1. 	Intentional Interference with Contractual Relations (Count I)
To state a claim for tortious interference of contractual relations, Plaintiff must
allege: “(1) the existence of a valid contract between the plaintiff and a third party; (2) the
defendant’s knowledge of that contract; (3) the defendant’s intentional acts designed to
induce a breach or disruption of the contractual relationship; (4) actual breach or disruption
of the contractual relationship; and (5) resulting damage.” Ixchel Pharma, LLC v. Biogen,
Inc., 9 Cal.5th 1130, 1141 (2020).
Here, Better claims Counter-Defendants intentionally interfered with 	Better’s
contract with NEO. 	(ECF No. 81 ¶¶ 112–117.) 	Better alleges the existence of a valid
contract with NEO (id. ¶ 113), and claims Luminate knew of the existence of the contract
with NEO (id. ¶ 114). However, Better has failed to allege any actual breach or disruption
of its contract with NEO resulting from Luminate’s termination of its own partnership with
NEO—and only alleges that Luminate made it “substantially more difficult” to perform
the contract (id. ¶ 116). 	See Ellison v. Ventura Port Dist., 80 Cal. App. 3d 574, 582 (Ct.
App. 1978) (“A mere change of circumstances which makes performance more difficult or
more expensive should not be a bar to specific performance of a contract.”).
Thus, the Court GRANTS WITHOUT PREJUDICE Counter-Defendants’ motion
to dismiss (ECF No. 84) Better’s counterclaim for intentional interference with contractual
relations (Count I) (ECF No. 81).
2. 	Intentional 	Interference 	with 	Prospective 	Economic 	Relations
(Count II)
To plead the tort of intentional interference with prospective economic relations, a
plaintiff must plead: “(1) an economic relationship between the plaintiff and some third
party, with the probability of future economic benefit to the plaintiff; (2) the defendant's
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knowledge of the relationship; (3) intentional acts on the part of the defendant designed to
disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm to
the plaintiff proximately caused by the acts of the defendant.” 	Korea Supply Co. v.
Lockheed Martin Corp., 29 Cal. 4th 1134, 1153 (2003). The California Supreme Court has
clarified that to meet the third element, “a plaintiff must plead and prove that the
defendant's acts are wrongful apart from the interference itself.” 	Id. at 1154; see also
Republican Nat'l Comm. v. Google LLC, 742 F. Supp. 3d 1099, 1120 (E.D. Cal. 2024),
aff'd sub nom. Republican Nat'l Comm. v. Google Inc., No. 24-5358, 2026 WL 125195 (9th
Cir. Jan. 16, 2026). 	Plaintiffs also must show that “defendants engaged in conduct that
was wrongful by some legal measure other than the fact of the interference itself.” Rumble,
Inc. v. Daily Mail & Gen. Tr. PLC, No. CV 19-08420-CJC(EX), 2020 WL 2510652, at *5
(C.D. Cal. Feb. 12, 2020) (citing Contemporary Servs. Corp. v. Staff Pro Inc., 152 Cal.
App. 4th 1043, 1060 (2007)).
To the extent Better bases its claim on Counter-Defendants’ allegedly defamatory
statements, Better must show they can form the basis for an independent cause of action
for defamation. See id. To assert a prima facie case for defamation in California, 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). Additionally, to prevent
a defamation claim from being barred by California’s anti-SLAPP statute, Cal. Civ. Proc.
Code § 425.16, counter-plaintiffs’ defamation claims cannot be based on counter-
defendants’ statements to the Court in a motion for relief. 	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)).
If Better has not sufficiently alleged facts that can form the basis for a defamation claim,
Better’s tortious interference with prospective economic relations claims fails for the same
reason. See Rumble, Inc. v. Daily Mail & Gen. Tr. PLC, No. CV 19-08420-CJC(EX), 2020
WL 2510652, at *5 (C.D. Cal. Feb. 12, 2020) (citing Contemp. Servs. Corp. v. Staff Pro
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Inc., 152 Cal. App. 4th 1043, 1060 (2007) (dismissing intentional interference claim
because it was premised on allegedly wrongful conduct that could not serve as the basis
for a defamation claim)).
Here, 	Better 	claims 	Counter-Defendants 	intentionally 	interfered 	in 	Better’s
prospective economic relationship with NEO’s employees. 	(ECF No. 81 ¶¶ 118–125.)
More specifically, Better alleges Counter-Defendants deterred NEO employees from
joining Better by withholding software access and by making false and disparaging
statements about Better and NEO. (Id. ¶ 122.)
First, Better fails to show that Counter-Defendants’ withholding software access
(i.e., withholding NEO intranet or temporarily withholding the @neohomeloans.com email
domain) forms the basis for independently wrongful conduct (id. ¶¶ 60–61). Nor does the
Court find there to be any legal basis that Counter-Defendants’ withholding of software
access is wrongful. 	See Korea Supply Co., 63 P.3d 937, 953 (Cal. 2003) (“An act is not
independently wrongful merely because defendant acted with an improper motive”); cf
Norsat Int'l, Inc. v. B.I.P. Corp., No. 12CV674-WQH-NLS, 2014 WL 2453034, at *6 (S.D.
Cal. May 30, 2014) (citing FLIR Sys., Inc. v. Parrish, 174 Cal.App.4th 1270, 1279 (2009))
(“‘Mere possession of trade secrets by a departing employee’ is not sufficient to establish
misappropriation or show injury”).
Second, 	Better 	fails 	to 	show 	that 	Counter-Defendants’ 	allegedly 	“false 	and
defamatory” statements form the basis for independently wrongful conduct. 	Most of
Better’s alleged false or defamatory statements cannot provide the basis for an independent
cause of action for defamation because they are based on statements: (1) Counter-
Defendants made as part of their complaint or motion for preliminary injunction in this
Court (ECF No. 81 ¶¶ 73, 79, 80), or; (2) made by corporate officers of Luminate who are
not defendants to Better’s counterclaim action (id. ¶¶ 69, 70, 71), cf In re Impac Mortg.
Holdings, Inc. Sec. Litig., 554 F. Supp. 2d 1083, 1093 (C.D. Cal. 2008) (“[C]orporate
officers may not be held responsible for unattributed corporate statements solely on the
basis of their titles, even if their general level of day-to-day involvement in the
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corporation's affairs is pleaded”); or (3) are not “statement[s] of fact” (id. ¶¶ 71, 74), see
Maldonado, 72 Cal.App.4th at 645 (defamation claims must be based on false statements
of fact).
However, some of alleged statements by Counterclaim Defendant Reuter to industry
executives at a conference in Texas—that “NEO was unprofitable” and that “NEO was the
reason Celebrity had gone out of business” (ECF No. 81 ¶ 71)—are plausibly false
statements of fact that could cause reputational damage, Maldonado, 72 Cal.App.4th at
645. Even so, Better does not allege Counter-Defendant’s false statements were designed
to disrupt a third-party relationship (e.g., to prevent Luminate employees from working at
Better)—as necessary to allege a claim for tortious interference with economic relations.
Korea Supply Co., 29 Cal. 4th at 1153.
Thus, the Court GRANTS WITHOUT PREJUDICE Counter-Defendants’ motion to
dismiss (ECF No. 84) Better’s intentional interference with economic relationship cause of
action (Count II) (ECF No. 81).
3. 	Negligent 	Interference 	with 	Prospective 	Economic 	Relations
(Count III)
A plaintiff establishes the tort of negligent interference with prospective economic
advantage by demonstrating: (1) an economic relationship existed between the plaintiff and
a third party which contained a reasonably probable future economic benefit or advantage
to plaintiff; (2) the defendant knew of the existence of the relationship and was aware or
should have been aware that if it did not act with due care its actions would interfere with
this relationship and cause plaintiff to lose in whole or in part the probable future economic
benefit or advantage of the relationship; (3) the defendant was negligent; and (4) such
negligence caused damage to plaintiff in that the relationship was actually interfered with
or disrupted and plaintiff lost in whole or in part the economic benefits or advantage
reasonably expected from the relationship. N. Am. Chem. Co. v. Superior Ct., 59 Cal. App.
4th 764, 786 (1997).
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Here, Better alleges it had a “prospective economic relationship with NEO’s
employees that offered a high probability of future economic benefit to Better in the form
of mortgages originated by the NEO employees.” (ECF No. 81 ¶ 127 (emphasis added).)
However, California courts have held that “[a]n actual economic relationship with a third
party is required, and liability cannot be premised on . . . the more speculative expectation
that a potentially beneficial relationship will arise . . . in the future.” 	See Muddy Waters,
LLC v. Superior Ct., 62 Cal.App.5th 905, 926 (2021) (citing 	Sole Energy Co. v.
Petrominerals Corp. 128 Cal.App.4th 212, 243 (2005)). 	Since Better fails to allege any
actual existing economic relationship between itself and NEO employees, the Court
GRANTS WITHOUT PREJUDICE Counter-Defendants’ motion to dismiss (ECF No.
84) Better’s negligent interference with economic relationship cause of action (Count III)
(ECF No. 81).
C. 	California Penal Code § 502 (Count IV)
California's Comprehensive Computer Data and Access Fraud Act (“CDAFA”),
California Penal Code § 502, creates a private cause of action against defendants who
accessed plaintiffs’ computer systems and used software to record plaintiffs’ conversations
without permission. 	See Cal. Penal Code §§ 502(c)(2) (prohibits making unauthorized
copies of data from computer without permission), (c)(7) (prohibits unauthorized access to
computer 	network), 	(c)(8) 	(prohibits 	unauthorized 	introduction 	of 	any 	“computer
contaminant,” defined in § 502(b)(12) as “set of computer instructions that are designed to
. . . record,” to a computer network). To bring a CDAFA claim, a private owner of data
must adequately allege that she “suffer[ed] damage or loss by reason of a violation of”
CDAFA. In re Zoom Video Commc'ns Inc. Priv. Litig., 525 F. Supp. 3d 1017, 1044 (N.D.
Cal. 2021) (citing Cal. Penal Code § 502(e)(1)).
Here, Better alleges Counter-Defendants Pelham and Luminate “used the Teramind
spy software to monitor and record communications between Better and NEO employees
[who were working with Luminate at the time]” without Better’s consent. (ECF No. 81 ¶
137.) 	Better further alleges it was damaged because it expended “employee time and
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money” in an investigation to “determine the extent of the material accessed by Luminate
through its recordings of Better employees’ meetings with NEO employees” as a result.
(Id. ¶ 143.)
Regardless of whether the recording qualifies as an unauthorized “access” prohibited
by the CDAFA, the Court finds Better has not pled any damage or loss as a result of the
alleged CDAFA violation. The CDAFA, § 502(e)(1), allows compensatory damages for
“any expenditure reasonably and necessarily incurred” by the computer owner “to verify
that a computer system, computer network, computer program, or data was or was not
altered, damaged, or deleted” by unlawful access. 	Doe I v. Google LLC, 741 F. Supp. 3d
828, 846–47 (N.D. Cal. 2024). As alleged, Better’s investigative costs cannot qualify as
damages under the CDAFA. 	See Google LLC, 741 F. Supp. 3d at 847 (dismissing
plaintiff’s CDAFA claim under § 502(e)(1) where plaintiff’s “conclusory allegation that
they expended time and resources to investigate Google’s conduct” does not demonstrate
that the investigation’s purpose was to “verify that their data was or was not altered,
damaged, or deleted.”).
The 	Court, 	thus, 	GRANTS 	WITHOUT 	PREJUDICE 	Counter-Defendants’
motion to dismiss (ECF No. 84) Better’s California Penal Code § 502 cause of action
(Count IV) (ECF No. 81).
D. 	Invasion of Privacy, California Penal Code § 632 (Count V)
Better also brings a cause of action for violation of the California Invasion of Privacy
Act, California Penal Code § 632(a) (“CIPA § 632(a)”) (Count V) for Counter-Defendants’
alleged recordings of their Zoom calls and “other communications.” (ECF No. 81 ¶¶ 145–
152.) 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)).
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First, 	Better 	has 	adequately 	pled 	Counter-Defendants 	Pelham 	and 	Luminate
electronically recorded the conversation, meeting the first element of a CIPA § 632(a)
claim. (ECF No. 81 ¶¶ 148–149.)
Next, to demonstrate that the communications at issue are confidential under the
second element of CIPA § 632(a), Better must show it “has an objectively reasonable
expectation that the conversation is not being overheard or recorded.” 	In re Meta Pixel
Healthcare Litig., 647 F. Supp. 3d 778, 798 (N.D. Cal. 2022) (citing Flanagan, 27 Cal. 4th
at 777). To establish confidential communications, Better must demonstrate—despite that
the Zoom calls at issue were conducted on employer computers and over the internet—it
is still entitled to an objectively reasonable expectation of privacy. See Doe v. City & Cnty.
of San Francisco, 835 F. Supp. 2d 762, 769 (N.D. Cal. 2011) (citing TBG Ins. Services
Corp. v. Sup. Ct., 96 Cal.App.4th 443, 452 (2002)) (“[T]he use of computers in the
employment context carries with it social norms that effectively diminish the employee's
reasonable expectation of privacy with regard to the use of his employer's computers”); see
also 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)(California courts have developed a
presumption that Internet communications do not reasonably give rise to the reasonable
expectation of privacy); see also In re Meta Pixel Healthcare Litig., 647 F. Supp. 3d 778,
799 (N.D. Cal. 2022)(plaintiff must demonstrate “something unique about these particular
internet communications which justify departing from the presumption.”)
Better claims the Zoom calls (and the “other communications”) discussed in Count
V are nonetheless confidential communications because: (1) they took place among a small
group of people, (2) they were related to the development of a business venture among
participants, and (3) they involved “sensitive” information like “market data and business
strategy.” (See ECF No. 93 at 28:20-29-4.) Courts have found similar circumstances to
those alleged by Better can provide the basis for finding an objectively reasonable
expectation of privacy. See e.g., Williams v. United Airlines, Inc., No. C 19-02988 WHA,
2021 WL 77932, at *4 (N.D. Cal. Jan. 8, 2021) (citing United States v. McIntyre, 582 F.2d
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1221, 1223 (9th Cir. 1978)) (meetings with limited participants); see also Akopian v. VW
Credit, Inc., No. 2:12-CV-8679-SVW-RZ, 2012 WL 12884413, at *4 (C.D. Cal. Dec. 19,
2012) (calls related to a profitable venture reasonably expected to be confined to the
parties); see also Faulkner v. ADT Sec. Servs., Inc., 706 F.3d 1017, 1020 (9th Cir. 2013)
(citing Flanagan v. Flanagan, 27 Cal.4th 766, 776–77 (2002)) (communications that
include “sensitive . . . market data [and] business strategy”). Thus, the Court finds Better
has sufficiently alleged that the communications at issue qualify as “confidential”
communications under the second element of CIPA § 632(a).
Lastly, regarding the third element of CIPA § 632(a), Better claims it did not consent
to the recording of the calls at issue. California is a two-party consent state with respect to
recording private conversations, meaning it is illegal to record a conversation unless all
parties (here, including Better) agree to the recording. 	See Green v. City & Cnty. of San
Francisco, No. 17-CV-00607-TSH, 2021 WL 3810243, at *38 (N.D. Cal. Aug. 26, 2021),
aff'd, No. 21-16465, 2023 WL 7211421 (9th Cir. Nov. 2, 2023) (citing CIPA § 632).
On the one hand, Better cites the Pelham Declaration2 as the basis for its CIPA §
632(a) claim. 	(See ECF Nos. 81 ¶¶ 84-99, 145-152; 23-2.) 	According to the Pelham
Declaration, all Luminate employees were notified by an employee handbook that their
work devices were monitored by Luminate and communications may be recorded and had
signed the handbook (id. ¶ 5). Since Better’s allegations are based solely on the Pelham
Declaration, the Court assumes for purposes of this order that NEO employees had used
Luminate devices to converse with Better. Regardless, neither the Pelham Declaration nor
Better’s amended counterclaims provide that Better has signed the employee handbook, or
otherwise expressly agreed to be recorded. 	Further, though NEO employees received
notice through the handbook that conversations taking place on Luminate devices may be
2 Generally, the Court in a motion to dismiss is limited to corresponding facts on the face of the
complaint. However, the Court may take judicial notice of document outside complaint in the motion to
dismiss when the complaint references these documents. 	See Van v. Cameron, No. 10CV1051 AJB
(WVG), 2011 WL 13121345, at *1 (S.D. Cal. July 13, 2011) (citing Knievel v. ESPN, 393 F.3d 1068,
1076-77 (9th Cir. 2005)).
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recorded, neither the Pelham Declaration nor Better’s amended counterclaims provide that
Better was informed of the same. See Portillo v. J.D. Mellberg Fin. of Texas, L.L.C., No.
CV 16-9663 PA (EX), 2017 WL 11634948, at *2 (C.D. Cal. Aug. 31, 2017) (“In the typical
implied in fact consent scenario, a party is informed that his call will be recorded, and he
continues to use the communication system after receiving notice the communications are
being intercepted.”). Construing the evidence in favor of Better, the Court finds Better has
sufficiently demonstrated it did not provide either explicit or implied consent to the
recording of the communications at issue.
Thus, the Court DENIES Counter-Defendants’ motion (ECF No. 84) to dismiss
Better’s CIPA § 632(a) cause of action (Count V) (ECF No. 81).
E. 	Civil Conspiracy (Count VI)
“Under California law, there is no separate and distinct tort cause of action for civil
conspiracy.” 	Entm't Research Grp., Inc. v. Genesis Creative Grp., Inc., 122 F.3d 1211,
1228 (9th Cir. 1997); see also Applied Equip. Corp. v. Litton Saudi Arabia Ltd., 869 P.2d
454, 459 (Cal. 1994) (“Conspiracy is not an independent tort; it cannot create a duty or
abrogate an immunity. It allows tort recovery only against a party who already owes the
duty and is not immune from liability based on applicable substantive tort law principles.”).
“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.” Applied Equip. Corp., 869 P.2d
at 457.
The fact that Better cannot bring an independent cause of action for conspiracy is
alone, sufficient grounds for dismissing Better’s claims with prejudice. 	See Broidy Cap.
Mgmt., LLC v. State of Qatar, 982 F.3d 582, 588 (9th Cir. 2020) (finding the same);
AccuImage Diagnostics Corp v. Terarecon, Inc., 260 F. Supp. 2d 941, 947 (N.D. Cal. 2003)
(finding the same); Power Integrations, Inc. v. De Lara, No. 20-CV-410-MMA (MSB),
2020 WL 1467406, at *23 (S.D. Cal. Mar. 26, 2020) (finding the same).
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Even if Better had brought its civil conspiracy claim as part of the other claims it
“incorporates” into its civil conspiracy cause of action in its amended counterclaims (ECF
No. 81 ¶ 153), the Court has also dismissed those claims above. 	See e.g., Krisel v.
Contempo Homes, Inc., 2006 WL 5668181, at *3 (C.D. Cal. Sept. 27, 2006) (dismissing
the plaintiff's civil conspiracy claim “[b]ecause plaintiff has not pleaded a separate tort
claim” to form the basis for the conspiracy).
Thus, the Court GRANTS WITH PREJUDICE Counter-Defendants’ motion (ECF
No. 84) to dismiss Better’s civil conspiracy cause of action (Count VI) (ECF No. 81).
F. 	Unfair Business Practices (Bus. & Prof. Code § 17200) (Count IX)
Better brings a cause of action for violation of Cal. Bus. & Prof. Code § 17200
(“UCL”) (Count IX) (ECF No. 81). 	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
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.
Here, Better alleges that Counter-Defendants’ unlawful acts under the UCL include:
tortious interference (Counts I, II, III); CDAFA violation (Count IV); CIPA § 632(a)
violation (Count V); and Lanham Act violations (Count VII).
Given that the Court has dismissed Better’s claims for Counts I, II, III and IV, the
Court GRANTS IN PART, WITHOUT PREJUDICE Counter-Defendants’ motion to
dismiss Better’s UCL claims to the extent that they are based on Counts I, II, III and IV.
The Court, however, refrains from ruling on Better’s UCL claim to the extent it is
based on the Lanham Act claims (Count VII)—given that Counter-Defendants have not
moved to dismiss Better’s independent cause of action under the Lanham Act. 	As such,
the Court DENIES IN PART Counter-Defendants’ motion to dismiss Better’s UCL claim
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to the extent it is based on Count VII. Additionally, the Court DENIES IN PART Counter-
Defendants’ motion to dismiss Better’s UCL claim to the extent it is based on Count V,
since the Court has denied dismissal of Count V.
IV. 	CONCLUSION
The Court DENIES IN PART and GRANTS IN PART Counter-Defendants’
motion to dismiss (ECF No. 84) Better’s amended counterclaims (ECF No. 81).
The Court DENIES Counter-Defendant’s motion to dismiss Better’s claims based
on the California anti-SLAPP statute, Cal. Civ. Proc. Code § 425.16, to dismiss Better’s
CIPA § 632(a) cause of action (Count V), and to dismiss Better’s UCL cause of action to
the extent it’s based on Count V or Counter-Defendants’ Lanham Act cause of action
(Count VII) or Count V.
Next, the Court GRANTS WITHOUT PREJUDICE Counter-Defendants’ motion
to dismiss (ECF No. 84) and DISMISSES Better’s causes of action (ECF No. 81) for:
1. Count I: Intentional Interference with Contractual Relations (id. ¶¶ 112–117);
2. Count II: Intentional Interference with Economic Relations (id. ¶¶ 118–125);
3. Count III: Negligent Interference with Prospective Economic Relations (id. ¶¶
126–133);
4. Count IV: Violation of CDAFA (id. ¶¶ 134–144); and
5. Count IX: Unfair Competition, to the extent Better’s claims are based on Counts
I–IV (id. ¶¶ 173–180).
For these claims, the Court GRANTS Better leave to amend.
Lastly, the Court GRANTS WITH PREJUDICE Counter-Defendants’ motion to
dismiss (ECF No. 84) and DISMISSES Better’s cause of action for civil conspiracy (Count
VI) (ECF No. 81).
IT IS SO ORDERED.
DATED: February 26, 2026 Hon. Cynthia Bashant, Chief Judge
United States District Court
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