Unreported / Non-Citable
Background
Michael Scheiman, a former sales executive, sued Edward Don & Company, LLC and its parent, Sysco Corporation, in state court in October 2025; defendants removed the case to the Northern District of California on diversity grounds. His operative complaint alleges unpaid commissions of about $359,000 after his December 2024 termination and late production of payroll records and his personnel file. Those claims are not decided in this order.
Edward Don's amended answer asserts eight counterclaims. Taking its allegations as true for this motion, Scheiman, as a Vice President, made pricing and pursuit decisions, joined strategy meetings, supervised sales staff, and had unusual access to confidential information. Before leaving in December 2024, Edward Don alleges, he arranged a move to competitor The Sam Tell Companies, helped recruit Edward Don employees, planned to disrupt its Oakland operations, urged clients to delay until he joined the competitor, and deleted most of his emails and contacts. It further alleges he then worked on the same six-figure project for the competitor using the kitchen design developed at Edward Don, causing Edward Don to lose the project and its profits. Scheiman moved under Rule 12(b)(6) to dismiss four counterclaims: breach of fiduciary duty, conversion, unfair competition, and intentional interference with prospective economic advantage, arguing that the California Uniform Trade Secrets Act (CUTSA) supersedes them and that they are inadequately pleaded.
The Court’s Holding
Fiduciary duty (denied). CUTSA supersedes claims resting on the same nucleus of facts as trade secret misappropriation, but the alleged recruiting, planned disruption of operations, and steering of clients to delay were conduct independent of misappropriation. On fiduciary status, what matters is the trust, confidence and discretion reposed in the employee, not title, and the test is participation in management, a fact question. The allegations met the pleading threshold, so the court could not say Scheiman was not a fiduciary as a matter of law. The claim is also not redundant of the separate duty of loyalty counterclaim, which is a distinct claim.
Conversion (granted with leave to amend). The gravamen was trade secret misappropriation: the counterclaim defines the confidential information Scheiman allegedly kept as trade secrets and does not allege he withheld non-trade-secret materials. Conversion is a tort, so CUTSA's carve-out for contractual remedies does not save it; the unchallenged contract counterclaim is unaffected. Because amendment might cure the defect, Edward Don may file an amended counterclaim within fourteen days.
Unfair competition and interference (denied). CUTSA does not supersede the unfair competition counterclaim at least as to the 'unfair' prong, which rests on disloyalty, diversion of opportunities and recruitment; the court did not separately analyze the 'unlawful' prong. Scheiman conceded the claim rises or falls with the other non-superseded counterclaims, which survive. The interference counterclaim survived because trade secret misappropriation was only one of several predicates and the allegations that Scheiman steered clients to delay and redirected project communications to the competitor, after which Edward Don lost the project, plausibly alleged actual disruption.
Key Takeaways
- CUTSA supersedes a claim only to the extent it rests on the same nucleus of facts as trade secret misappropriation, so pleading distinct wrongdoing such as recruiting employees and diverting clients can preserve it.
- An employee's fiduciary status turns on participation in management rather than title, and it is a fact question that is difficult to resolve against the pleader at the motion to dismiss stage.
- A conversion claim identifying only trade secrets as the property taken is superseded by CUTSA, while a contract claim for failure to return the same information is not.
- This is a pleading-stage ruling; the court found no facts, and the four unchallenged counterclaims remain pending.
Why It Matters
The order shows how a former employer can plead around CUTSA supersession in a departing-employee dispute: counterclaims limited to taking and using confidential information are vulnerable, while those built on recruitment, client diversion and disloyal competition can proceed alongside trade secret claims. It also confirms that a Vice President title is not dispositive on fiduciary status.
The ruling is an unreported magistrate judge order issued by consent and carries limited precedential weight. The conversion dismissal is not a final judgment because leave to amend was granted, and the unchallenged trade secret, duty of loyalty and contract counterclaims, along with Scheiman's claims, remain pending.