## Facts

- Align Technology employed Bao Tran as an intellectual property attorney responsible for patent drafting and prosecution.
- Align alleged Tran operated a side law practice during his employment and filed substantially more patent applications for that practice than for Align.
- Align alleged Tran reused language from at least one Align patent application in an application prepared for the side practice.
- In 2005, Align sued Tran in a prior action asserting claims including unfair competition, trade secret misappropriation, breach of contract, conversion, and breach of loyalty arising from alleged misuse of Align’s confidential information; Tran cross-complained for wrongful termination and breach of contract.
- The prior action and cross-complaint were settled in 2006.
- In 2008, Align filed a new action asserting breach of contract, breach of fiduciary duty/duty of loyalty, and conversion based on Tran’s alleged side-practice activities and diversion or misuse of patent-related work while employed.
- Tran demurred, arguing Align’s 2008 claims were barred by the compulsory cross-complaint statute, Code of Civil Procedure § 426.30, because they should have been asserted as cross-claims when Align answered Tran’s cross-complaint in the prior action.
- The trial court sustained the demurrer without leave to amend and dismissed; Align appealed.

## Issues

1. Whether Align’s 2008 claims were “related causes of action” that were compulsory cross-claims under Code of Civil Procedure § 426.30 and therefore barred because they were not pleaded in the prior action.
2. Whether § 426.30 bars only “then existing” claims, allowing later-accruing claims to proceed.
3. Whether the trial court erred by denying leave to amend where the complaint potentially could be amended to state nonbarred, later-accruing claims.

## Decision

- The Court of Appeal reversed the dismissal.
- The court held the complaint included some claims that were barred on their face because they were logically related to Tran’s prior cross-complaint and should have been asserted in the earlier action.
- The court further held Align could potentially plead claims that did not exist when it answered in the prior action, which would not be barred by § 426.30.
- The case was remanded with directions to sustain the demurrer with leave to amend.

## Legal Principles

- Code of Civil Procedure § 426.30 bars a party from later asserting a “then existing” related cause of action against an opposing party if the party failed to plead it as a cross-complaint when answering in prior litigation.
- “Related” causes of action are determined by a logical-relationship test: claims are related when they arise from the same transaction or series of transactions such that resolving them together serves the statutory purpose of avoiding multiple suits and inconsistent outcomes.
- The compulsory cross-complaint bar applies only to causes of action that had accrued (existed) at the time the party answered in the prior action; later-accruing claims are not compulsory and are not barred on that basis.
- When a pleading includes some barred claims but the plaintiff may be able to allege nonbarred, later-accruing claims, the proper course is to sustain a demurrer with leave to amend rather than dismiss with prejudice.

## Conclusion

The court held that § 426.30 can bar later lawsuits asserting claims logically related to prior litigation if those claims already existed when the party answered in the earlier case, but the statute does not bar later-accruing claims; because Align might amend to plead nonbarred claims, dismissal without leave to amend was error.


Align Tech., Inc. v. Tran, 179 Cal. App. 4th 949, 102 Cal. Rptr. 3d 343 (Ct. App. 2009)