Spot Water Management v. Plageman CA4/1 (2013) · DecisionDepot
Spot Water Management v. Plageman CA4/1
California Court of Appeal Nov 13, 2013 No. D059270Unpublished
Filed 11/13/13 Spot Water Management v. Plageman CA4/1 NOT TO BE PUBLISHED IN OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
SPOT WATER MANAGEMENT, INC., D059270
Plaintiff and Appellant,
v. (Super. Ct. Nos. 37-2009-00052285- CU-JR-NC; 37-2009-00060105-CU- KEVIN PLAGEMAN, et al., BT-NC)
Defendants and Respondents.
APPEAL from a judgment of the Superior Court of San Diego County,
Jacqueline M. Stern and Thomas P. Nugent, Judges. Affirmed.
Caryn N. Fabian, for Plaintiff and Appellant.
Zeldes & Haeggquist, Alreen Haeggquist and Aaron M. Olsen, for Defendants and
Respondents.
Spot Water Management, Inc. (SWM) appeals (1) judgment entered after the
court's order granting summary adjudication against SWM on its claim for breach of
contract against Plageman and claim for misappropriation of trade secrets against
Plageman's business partner, Craig Zellers, and Zellers's and Plageman's current business,
Zellers-Plageman Just Add Water, LLC (Just Add Water); (2) evidentiary rulings related
to the motion for summary judgment; (3) judgment for Plageman entered after a bench
trial on SWM's remaining claim for misappropriation of trade secrets and its appeal to the
trial court of the labor commissioner's order in Plageman's favor; and (4) postjudgment
orders awarding attorney fees to Plageman, Zellers and Just Add Water. We affirm the
judgment.
FACTUAL AND PROCEDURAL BACKGROUND
SWM is a San Jose based company that provides irrigation and other water related
services primarily to golf courses and other commercial properties in California. The
firm is owned and operated by Andy Slack. Plageman was hired by Slack as an irrigation
design associate in March 2006. At the time he was hired, Plageman had worked in the
irrigation industry for several years and was experienced in the various software
programs used by SWM. The terms of Plageman's employment by SWM were set forth
in a letter agreement from Slack and signed by Plageman. The agreement provided for an
annual salary of $30,000 and required Plageman to keep SWM proprietary information
confidential during and after his employment. Though not set forth in the agreement,
Plageman was also eligible for quarterly bonuses and commissions for work he brought
to SWM.
The agreement prohibited Plageman from "engag[ing] in any other business
activity, directly or indirectly, regardless of whether it is for profit, gain or otherwise that
is similar to the business activity of [SWM] unless [he] received written approval."
Despite this provision, Slack approved of Plageman completing a number of outstanding
2
projects for his prior employer after starting work for SWM. SWM provided Plageman
with a laptop and Plageman worked primarily from his home office in San Diego and on-
site at client locations. He did not submit time records and was paid every other week in
equal installments regardless of the actual hours worked.
On January 9, 2008, Slack sent Plageman a lengthy e-mail questioning Plageman's
commitment to SWM and requesting a meeting to discuss Plageman's future with the
company. Plageman responded with an e-mail attaching a short letter of resignation and
also called Slack with this news. The two met the following day and Plageman returned
all SWM property to Slack. In February 2008, Plageman formed Just Add Water with
Zellers.
After retrieving Plageman's SWM computer, Slack discovered that on January 10,
2008, Plageman had forwarded e-mails from his SWM inbox to his personal e-mail
address and then deleted the e-mails from the inbox. Slack also found e-mails suggesting
Plageman had done irrigation work outside of his employment with SWM without
Slack's permission.
After Plageman resigned, SWM did not pay Plageman. As a result, Plageman
filed a complaint with the Department of Labor Standards Enforcement (DLSE) against
SWM seeking wages of $5,245.80, consisting of $922.88 in regular wages for his final
pay period from January 1 to January 10, 2008, $4,230 for commissions and $92.92 in
business expenses, plus penalties. On February 19, 2009 the labor commissioner found
in favor of Plageman and awarded him $11,091.75 in wages, penalties and interest. The
following month, SWM filed an appeal of that order in San Diego Superior Court. On
3
June 2, 2009, SWM filed a complaint in Santa Clara Superior Court against Plageman for
breach of the employment agreement and against Plageman, Zellers and Just Add Water
for misappropriation of trade secrets.1 The case was transferred to San Diego and
consolidated with SWM's appeal of the DLSE order.
After engaging in discovery, Plageman, Zellers and Just Add Water moved for
summary judgment and summary adjudication of SWM's cause of action for
misappropriation of trade secrets and breach of contract. The court granted Zellers's and
Just Add Water's motion for summary judgment of SWM's misappropriation of trade
secrets claim, but denied Plageman's motion with respect to that claim. The court granted
Plageman's motion on the breach of contract cause of action, finding SWM's own failure
to perform by not paying Plageman's salary from January 1, 2008 to January 10, 2008
foreclosed the claim.
SWM's remaining cause of action against Plageman for misappropriation of trade
secrets and its appeal of the DLSE order proceeded to a bench trial before a different
judge. After the conclusion of the two-day trial, the court issued a proposed statement of
decision in Plageman's favor on all issues, except the commission portion of the DLSE
order, which it reversed. The court entered two judgments, one in favor of Plageman and
a second in favor of Zellers and Just Add Water based on the earlier summary judgment
order.
1 SWM brought other related claims that it later voluntarily dismissed and that are not relevant to this appeal.
4
Thereafter, Zellers and Just Add Water moved for attorney fees under Civil Code
section 3426.4, and Plageman moved separately for attorney fees under the same
provision and under Labor Code section 98.2. Zellers's and Just Add Water's motion was
heard by the judge who ruled on the summary judgment motion, while Plageman's
motion was heard by the trial judge. After two hearings on each attorney fee motion and
the submission of supplementary evidence, both motions were granted. Plageman was
awarded $43,881.25 in attorney fees and costs, while Zellers and Just Add Water
received $29,737.
DISCUSSION
I
SUMMARY JUDGMENT
A. Standards
"Summary judgment is appropriate 'if all the papers submitted show that there is
no triable issue as to any material fact and that the moving party is entitled to a judgment
as a matter of law.' (Code Civ. Proc., § 437c, subd. (c).)" (San Jose Construction, Inc. v.
S.B.C.C., Inc. (2007) 155 Cal.App.4th 1528, 1534 (San Jose).) A moving defendant
"bears the initial burden to show that the action or cause of action has no merit—that is,
'that one or more elements of the cause of action, even if not separately pleaded, cannot
be established, or that there is a complete defense to that cause of action.' (Code Civ.
Proc., § 437c, subds. (a), (p)(2).)" (San Jose, supra, at p. 1534.) If the defendant does
not meet this initial burden, "it is unnecessary to examine the plaintiff's opposing
evidence; the motion must be denied." (Ibid.)
5
If, however, the defendant "carries his burden of production, he causes a shift, and
the opposing party is then subjected to a burden of production of his own to make a prima
facie showing of the existence of a triable issue of material fact." (Aguilar v. Atlantic
Richfield Co. (2001) 25 Cal.4th 826, 850.) "The plaintiff . . . may not rely upon the mere
allegations or denials of its pleadings to show that a triable issue of material fact exists,
but, instead, shall set forth the specific facts showing that a triable issue of material fact
exists as to that cause of action. . . ." (Code Civ. Proc., § 437c, subd. (p)(2).)
"On appeal, we conduct a de novo review of the record to 'determine with respect
to each cause of action whether the defendant seeking summary judgment has
conclusively negated a necessary element of the plaintiff's case, or has demonstrated that
under no hypothesis is there a material issue of fact that requires the process of trial, such
that the defendant is entitled to judgment as a matter of law.' [Citation.]" (San Jose,
supra, 155 Cal.App.4th at p. 1535.) As in the trial court, "[w]e examine the pleadings to
ascertain the elements of the plaintiff's claim; the moving papers to determine whether
the defendant has established facts justifying judgment in its favor; and, if the defendant
did meet this burden, plaintiff's opposition to decide whether he or she has demonstrated
the existence of a triable issue of material fact." (Ibid.)
"In performing our de novo review, we must view the evidence in a light favorable
to plaintiff as the losing party [citation], liberally construing her evidentiary submission
while strictly scrutinizing defendants' own showing, and resolving any evidentiary doubts
or ambiguities in plaintiff's favor." (Saelzler v. Advanced Group 400 (2001) 25 Cal.4th
763, 768.) "We need not defer to the trial court and are not bound by the reasons for the
6
summary judgment ruling; we review the ruling of the trial court, not its rationale."
(Knapp v. Doherty (2004) 123 Cal.App.4th 76, 85.)
B. Breach of Contract
SWM's complaint asserts Plageman breached his employment agreement both by
misappropriating SWM's trade secret information and by engaging in the same business
as SWM while employed there without obtaining Slack's approval. Plageman moved for
summary judgment of SWM's cause of action for breach of contract on the grounds that
SWM's failure to fulfill its obligation to pay Plageman his salary for his final 10 days of
employment foreclosed the claim. In opposition, SWM argued a disputed factual issue
existed as to whether it was required to pay Plageman because SWM alleged Plageman
did not provide any services during that period.
The trial court rejected SWM's argument, finding SWM failed to present any
evidence contradicting its obligation to pay Plageman his wages: "Plageman was a
salaried employee, was ready, willing and able to perform work from Jan[uary] 1, 2008
to Jan[uary] 10, 2008[,] actually performed work during that period, and was therefore
entitled to receive his full salary for that week. (See 29 [C.F.R. § 541.602(a)[.])" The
court concluded in "light of the uncontroverted evidence showing Plaintiff failed to
perform, it cannot prevail . . . as a matter of law."
SWM does not dispute that to overcome summary adjudication of its breach of
contract claim, it was required to show prima facie evidence of (1) the existence of a
valid contract, (2) its performance of the contract or excuse for nonperformance, (3)
Plageman's breach, and (4) damages. (Walsh v. West Valley Mission Community College
7
Dist. (1998) 66 Cal.App.4th 1532, 1545.) SWM argues here, as it did in the trial court,
that summary judgment was not appropriate because it presented evidence disputing its
obligation to pay Plageman's final salary installment.2
SWM contends Slack's declaration and Plageman's own deposition testimony
showed that whether SWM was required to pay Plageman from January 1 to January 10,
2008 was disputed. Specifically, SWM points to Slack's statements that (1) he
"questioned Defendant Plageman what services he had provided for SWM since
January 1, 2008," (2) his attorney "further questioned [Plageman's] attorney regarding
what services were performed because SWM intended on paying Plageman for services
rendered," and (3) he searched "Plageman's returned company computer and checked his
cell phone bill to determine what services were provided to SWM since January 1, 2008
and was unable to find any evidence of work. . . ." SWM also argues "Plageman's own
deposition testimony" was "that he not did not perform any of his duties after
December 31, 2007."3
2 SWM focuses solely on whether it was obligated to pay wages. It does not argue that even if its failure to pay wages constitutes nonperformance, its breach of contract claims should not have been foreclosed in this case. Because SWM does not advance this argument, we decline to address it here. (See Sprague v. Equifax, Inc. (1985) 166 Cal.App.3d 1012, 1050 ["The reviewing court is not required to make an independent, unassisted study of the record in search of error or grounds to support the judgment. It is entitled to the assistance of counsel. Accordingly every brief should contain a legal argument with citation of authorities on the points made. If none is furnished on a particular point, the court may treat it as waived, and pass it without consideration."].)
3 The actual deposition testimony SWM cites, however, is that Plageman did not recall if he worked on any AutoCAD projects, GPS mapping, field staking, computer programming, or central map creations from January 1 to January 9, 2008. He was 8
Plageman responds that despite this evidence, there was no dispute he was entitled
to his salary for the period of time from January 1 to January 9, 2008 under the applicable
labor regulations. The regulation cited by the court in its order, 29 Code of Federal
Regulations part 541.602(a) (2004), provides that "an exempt employee must receive the
full salary for any week in which the employee performs any work without regard to the
number of days or hours worked." SWM does not dispute that Plageman was an exempt
employee entitled to an annual salary of $30,000 under his employment agreement with
SWM and that it failed to pay him for this period.
In support of his argument that SWM's evidence did not contradict his entitlement
to his final wages, Plageman points to the fact that during his tenure with SWM, when
there was not a specific project to work on, he was paid so long as he was available to
answer phone calls and check e-mails. Plageman testified this was the case from
January 1 to January 9, 2008. Plageman also points to Slack's January 9, 2008 e-mail
concerning Plageman's performance, which details a number of work-related telephone
calls between Slack and Plageman during the period in question and Plageman's
January 10, 2008 meeting with Slack to return his company computer and other property.
We agree with Plageman that SWM's evidence concerning what work Plageman
did (or did not do) in his final days of employment did not create a material factual
dispute concerning Plageman's entitlement to his final installment of salary. Slack's
declaration and Plageman's testimony that he (Plageman) did not recall what services he
unsure if he made any telephone calls during this period, and he went to a storage facility to retrieve SWM property to return to Slack on January 10, 2008. 9
provided to SWM addressed Plageman's level of productivity during that time. Even if
true, these facts did not contradict Plageman's testimony that he was available to work
from January 1 to January 9 and the e-mail from Slack in which Slack stated Plageman
did some work during that period. Given these undisputed facts, under the terms of his
employment agreement and the applicable labor regulations Plageman was entitled to
salary for this period of employment.4
SWM also argues its withholding of Plageman's salary was not a breach of the
employment agreement because the federal regulation and the DLSE's Enforcement
Policies and Interpretations Manual (DLSE Manual) permit an employer to deduct pay
when the employee "is absent from work for one or more full days, and [the employee]
need not be paid for any workweek in which they perform no work."
While 29 Code of Federal Regulations part 541.602(a) (2004) does provide that
"[e]xempt employees need not be paid for any workweek in which they perform no
work," it goes on to state that "[i]f the employee is ready, willing and able to work,
deductions may not be made for time when work is not available." The DSLE Manual
provisions SWM relies on mirror the federal regulation. (DLSE Manual (March 2006)
§§ 51.6.3.2, 51.6.14.3.) As explained, the uncontradicted evidence showed Plageman
was ready, willing and able to work, and did work some, during the time period in
question. SWM presented no evidence to support its claim that Plageman was absent
and, therefore, not entitled to his salary under the regulation.
4 The court's subsequent affirmance of the DSLE order awarding Plageman wages after trial also supports this conclusion. 10
C. Misappropriation of Trade Secrets Against Just Add Water
"Under the [Uniform Trade Secret Act (UTSA)], a prima facie claim for
misappropriation of trade secrets requires the plaintiff to demonstrate: (1) the plaintiff
owned a trade secret, (2) the defendant acquired, disclosed, or used the plaintiff's trade
secret through improper means, and (3) the defendant's actions damaged the plaintiff."
(Sargent Fletcher, Inc. v. Able Corp. (2003) 110 Cal.App.4th 1658, 1665.) The trial
court granted summary judgment in favor of Zellers and Just Add Water, finding there
was no triable issue of fact as to whether it "acquired, disclosed, or used any of Plaintiff's
SWM contends the court erred by concluding the evidence on this issue was
uncontroverted because it presented facts disputing whether Just Add Water acquired
5 Civil Code section 3426.1 of the UTSA (Civ. Code, §§ 3426, et seq.) provides: "Definitions. As used in this title, unless the context requires otherwise: [¶] (a) 'Improper means' includes theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means. Reverse engineering or independent derivation alone shall not be considered improper means. [¶] (b) 'Misappropriation' means: [¶] (1) Acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or [¶] (2) Disclosure or use of a trade secret of another without express or implied consent by a person who: [¶] (A) Used improper means to acquire knowledge of the trade secret; or [¶] (B) At the time of disclosure or use, knew or had reason to know that his or her knowledge of the trade secret was: [¶] (i) Derived from or through a person who had utilized improper means to acquire it; [¶] (ii) Acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or [¶] (iii) Derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use; or [¶] (C) Before a material change of his or her position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake."
11
SWM's trade secrets by improper means.6 In support of this argument, SWM identifies:
(1) e-mails Plageman forwarded from his SWM e-mail account to his personal e-mail
account on January 10, 2008; (2) Plageman's deposition testimony he worked on side
projects while employed by SWM; (3) Plageman's deposition testimony that his job
duties at Just Add Water included sales and procuring clients; and (4) Zellers's deposition
testimony to the same effect.
Assuming as the trial court did that SWM had trade secrets, to overcome summary
judgment SWM was required to establish a prima facie case that each defendant
"acquired, disclosed, or used the plaintiff's trade secret through improper means."
(Sargent Fletcher, Inc. v. Able Corp., supra, 110 Cal.App.4th at p. 1665.) None of the
facts identified by SWM, however, support its contention that Just Add Water obtained,
disclosed or used any alleged trade secret of SWM.
With respect to Plageman's act of e-mailing SWM's alleged trade secrets to
himself, even if it violated the UTSA, it was not evidence of misconduct by Just Add
Water, which had not yet been formed. Likewise, Plageman's testimony he worked on
side projects while employed by SWM bears no relationship to his later-formed business.
The other evidence, which SWM argues created a factual dispute as to whether Plageman
brought clients from SWM to Just Add Water, also did not raise triable issues of fact with
respect to whether Just Add Water's misappropriated SWM's trade secrets. In addition to
6 SWM also contends there was a triable issue of fact with respect to Zellers's misappropriation of trade secrets. SWM, however, voluntarily dismissed Zellers prior to the court's ruling, rendering moot SWM's appeal of the dismissed claim against Zellers. 12
relating only to Plageman's conduct, the evidence SWM points to (that one of Plageman's
job duties at Just Add Water was sales) did not show Just Add Water used trade secret
information in its efforts to secure new business, or that any client left SWM for Just Add
Water. We find no error in the trial court's finding that SWM failed to establish a prima
facie case of misappropriation of trade secrets by Just Add Water.
D. Evidentiary Ruling
SWM contends the trial court erred by sustaining Plageman's objection to
statements in Slack's declaration in support of its opposition to Plageman's motion for
summary judgment. In the declaration, Slack stated he "attended the Golf Course
Superintendents Association of Northern California (GCSANC) Annual Superintendents
Institute Meeting in the fall of 2008. I saw the Del Mar Country Club Irrigation As-Built
displayed by Zellers-Plageman Just Add Water at the meeting. The displayed As-Built
appeared to be prepared using the same software, codes, and symbols as those used by
SWM."7 Plageman objected to these statements on the numerous grounds: lack of
foundation; violation of the best evidence rule; lack of personal knowledge; improper
expert testimony; and that the statements were contrary to prior sworn testimony. The
court sustained the lack of foundation, best evidence and lack of personal knowledge
objections.
"On a summary judgment appeal, we review the trial court's evidentiary ruling for
abuse of discretion. [Citations.] ' "Discretion is abused whenever, in its exercise, the
7 An "as-built" is an irrigation design plan or drawing created using AutoCAD, which is a computer-aided design program. 13
court exceeds the bounds of reason, all of the circumstances before it being considered." '
[Citation.]" (Jennifer C. v. Los Angeles Unified School Dist. (2008) 168 Cal.App.4th
1320, 1332.) "The trial court's error in excluding evidence is grounds for reversing a
judgment only if the party appealing demonstrates a 'miscarriage of justice'—that is, that
a different result would have been probable if the error had not occurred." (Zhou v.
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." (Civ. Code, § 3426.1, subd. (d).) "The test for trade secrets is whether the
matter sought to be protected is information (1) which is valuable because it is unknown
to others and (2) which the owner has attempted to keep secret." (Whyte v. Schlage Lock
Co. (2002) 101 Cal.App.4th 1443, 1454 (Whyte).)
"The ultimate determination of trade secret status is subject to proof presented at
trial." (Whyte, supra, 101 Cal.App.4th at p. 1453; see also Thompson v. Impaxx, Inc.
(2003) 113 Cal.App.4th 1425, 1430 ["The issue of whether information constitutes a
trade secret is a question of fact."].) This court "cannot[] resolve the conflicts in the
evidence or reweigh it. The applicable standard of review dictates that we 'interpret the
facts in the light most favorable to the prevailing party and indulge in all reasonable
inferences in support of the trial court's order[.]' . . . Accordingly, we must interpret the
facts favorably to the" trial court's judgment. (Whyte, supra, at p. 1458.)
At trial, Slack testified he did not have "specific definitions" of the trade secrets
SWM claimed Plageman misappropriated. Instead, Slack pointed to the processes and
procedures that he, another employee, Lauren Young, and Plageman developed over time
19
to improve the efficiency and standardization of their use of various industry software
programs, including AutoCAD, Trimble, Sitepro, Cirru and Nimbus. Slack and Young
identified some of these processes as "attributes," "feature codes," and "data dictionaries,"
which they defined as abbreviations for features on a golf course or other irrigation
project, used in the field in the collection of GPS data and later transferred to AutoCAD
and other industry software programs. Slack also identified SWM's customization of
AutoCAD with tool palettes and the creation of AutoCAD templates with title blocks and
layering as trade secrets.
Slack, however, conceded that the ability to create these shortcuts and the
customization of AutoCAD were not processes and procedures unique to SWM; rather
they were inherent capabilities of the software programs. Further, when Plageman was
hired by Slack, he had six years of industry experience and was trained and
knowledgeable in the use of AutoCAD and the various other industry software programs
at issue. Indeed, Plageman brought AutoCAD files he created in his previous job to
SWM and used those files in his work for SWM. Slack himself shared SWM's AutoCAD
files, which included information SWM claimed as trade secrets, with clients upon
request.
In addition, Plageman's former employer testified the processes and procedures
SWM claimed as trade secrets would not add value to its business because they were
merely functions of the various software programs and were also common industry
knowledge. This evidence showed the alleged trade secrets were not confidential, did not
20
"derive[] value from being unknown to others," and, therefore, supported the court's
finding in favor of Plageman.8 (Whyte, supra, 101 Cal.App.4th 1443, 1455.)
III
ATTORNEY FEES
Plageman and Zellers/Just Add Water each brought a motion for attorney fees.
Plageman's motion was brought under both Labor Code section 98.2, subdivision (c) and
Civil Code section 3426.4, while Zellers and Just Add Water sought fees under Civil
Code section 3426.4. SWM challenges the two attorney fee awards on three grounds.
SWM contends (1) there was no evidence to support the court's findings that its
prosecution of its claim for misappropriation of trade secrets was made in bad faith; (2)
the court improperly awarded fees for work related to SWM's breach of contract claim;
and (3) the court failed to consider the reasonableness of the fee. We do not find merit in
these arguments.
"Section 3426.4 authorizes the trial court to award attorney fees as a deterrent to
specious trade secret claims." (FLIR Systems, Inc. v. Parrish (2009) 174 Cal.App.4th
1270, 1275 (FLIR Systems).) It provides: "If a claim of misappropriation is made in bad
8 SWM's reliance on San Jose, supra, 155 Cal.App.4th 1528 is misplaced. There, the court reversed summary judgment, concluding a material question of fact existed as to whether plaintiff general contractor's compilation of information for specific construction projects it was awarded constituted trade secrets. (Id. at pp. 1542-1543.) Importantly, the defendants, plaintiff's former employee and his new employer (a competing general contractor), used the information to take the projects away from the plaintiff. (Id. at pp. 1540-1541.) In addition to the important distinction that SWM appeals the court's judgment after trial, SWM does not contend any of its alleged secrets were used by Plageman to take its business away. 21
faith, . . . the court may award reasonable attorney fees to the prevailing party." (Civ.
Code, § 3426.4.) "Although the Legislature has not defined 'bad faith,' our courts have
developed a two-prong standard: (1) objective speciousness of the claim, and (2)
subjective bad faith in bringing or maintaining the action, i.e., for an improper purpose."
(FLIR Systems, Inc., supra, at p. 1275.)
"Objective speciousness exists where the action superficially appears to have merit
but there is a complete lack of evidence to support the claim." (FLIR Systems, supra,
174 Cal.App.4th at p. 1276.) "Subjective bad faith may be inferred by evidence that
appellants intended to cause unnecessary delay, filed the action to harass respondents, or
harbored an improper motive. [Citation.] The timing of the action may raise an
inference of bad faith. [Citation.] Similar inferences may be made where the plaintiff
proceeds to trial after the action's fatal shortcomings are revealed by opposing counsel."
(Id. at. p. 1278.) The failure of proof alone may support an inference "that the plaintiffs
must have knowingly and intentionally prosecuted" the claim in bad faith. (Gemini
Aluminum Corp. v. California Custom Shapes, Inc. (2002) 95 Cal.App.4th 1219, 1262
(Gemini).)
We review a court's decision to award attorney fees to a prevailing defendant on a
claim for misappropriation of trade secrets allegedly brought in bad faith under the abuse
of discretion standard. (Gemini, supra, 95 Cal.App.4th at pp. 1262-1263.) " 'Assuming
some evidence exists in support of the factual findings, the trial court's exercise of
discretion will not be disturbed unless it exceeds the bounds of reason. [Citation.] [¶] In
reviewing the facts which led the trial court to impose [or deny] sanctions, we must
22
accept the version thereof which supports the trial court's determination, and must
indulge in the inferences which favor its findings. [Citations.]' [Citation.]" (Ibid.)
SWM contends there was no "evidence before the court[] establishing bad faith on
the part of SWM." The record shows otherwise. With respect to whether the claim was
objectively specious, SWM voluntarily dismissed Zellers individually before the court's
ruling on its motion for summary judgment. This dismissal was sufficient evidence to
support the court's bad faith finding as to Zellers. Likewise, with respect to Just Add
Water, as discussed, the court granted its motion for summary judgment after finding
SWM failed to meet its burden to establish a prima facie case of misappropriation
because it did not present any evidence Just Add Water acquired, disclosed, or used
Plaintiff's alleged trade secrets. (See FLIR Systems, supra, 174 Cal.App.4th at p. 1277
[affirming finding claim was objectively specious where evidence showed "no 'actual
damages,' misappropriation, or threatened misappropriation of trade secrets, and no threat
of imminent harm."].)
With respect to Plageman, the trial court found there was no evidence to
substantiate SWM's claim that its practices and procedures were trade secrets. Rather,
the evidence presented by SWM showed the information at issue (1) was the knowledge
needed to customize the software used in the irrigation design industry and (2) was
commonly known to those in the industry. Additionally, Slack admitted SWM suffered
no harm as a result of the alleged misappropriation. The court did not abuse its discretion
in finding SWM's claim was objectively specious.
23
In addition to the existence of objective speciousness, which alone may establish
SWM's subjective bad faith, the timing of SWM's claim also supported the court's finding
on the second prong. (FLIR Systems, supra, 174 Cal.App.4th at p. 1278.) In his
declaration opposing the motion of Zellers and Just Add Water, Slack stated that shortly
after Plageman left SWM on January 10, 2008, he discovered e-mails from Plageman
evidencing work performed using SWM's trade secrets. Slack also stated he attended a
conference in the fall of 2008 where he saw Just Add Water's display of its work for the
Del Mar Country Club. From this display Slack allegedly concluded Plageman had used
SWM's trade secrets. Despite this knowledge, SWM did not file its claims for
misappropriation of trade secrets until June 2009, after the labor commissioner awarded
Plageman $11,091.75. SWM did not present any evidence explaining this delay, which
supported an inference of subjective bad faith. The court's finding that SWM's trade
secret claim was made in bad faith was supported by the record and we find no abuse of
discretion.
SWM also contends the court erred by not apportioning out fees related to its
claims for breach of contract, which unlike the appeal of the DLSE order and the
misappropriation claim were not supported by a fee shifting statute. The court's award of
attorney fees to Plageman for its defense of SWM's appeal of the DLSE order was based
on Labor Code section 98.2, subdivision (c). That provision states: "If the party seeking
review by filing an appeal to the superior court is unsuccessful in the appeal, the court
shall determine the costs and reasonable attorney's fees incurred by the other parties to
the appeal, and asses that amount as a cost upon the party filing the appeal."
24
"When a cause of action for which attorney fees are provided by statute is joined
with other causes of action for which attorney fees are not permitted, the prevailing party
may recover only on the statutory cause of action." (Bell v. Vista Unified School District
(2002) 82 Cal.App.4th 672, 686.) However, "[s]uch fees need not be apportioned when
incurred for representation of an issue common to both a cause of action for which fees
are permitted and one for which they are not. All expenses incurred on the common
issues qualify for an award." (Akins v. Enterprise Rent-A-Car Co. of San Francisco
(2000) 79 Cal.App.4th 1127, 1133; see also Bell, supra, 82 Cal.App.4th at p. 687
["Apportionment is not required when the claims for relief are so intertwined that it
would be impracticable, if not impossible, to separate the attorney's time into
compensable and noncompensable units."].) The apportionment of fees "rests within the
sound discretion of the trial court." (Ibid.) The exercise of discretion "is abused only
when its ruling ' "exceeds the bounds of reason, all of the circumstances before it being
considered." ' " (Ibid.)
In conclusory fashion, SWM argues its "appeal of the Labor Commissioner
[d]ecision does not have issues common to either of the claims in [its c]omplaint.
Therefore, the fees awarded pursuant to the statutes should have been apportioned." The
basis for the court's summary adjudication of SWM's breach of contract claim, however,
was its determination that SWM's failure to pay wages to Plageman precluded its claim.
That determination in turn was dependent on whether SWM was required to pay those
wages. This issue overlapped completely with SWM's appeal of the labor
commissioner's determination that those wages were owed to Plageman. Given this
25
overlap, the court's award of attorney fees to Plageman under Labor Code section 98.2
without apportionment of fees related to the breach of contract claim, was not an abuse of
discretion.
Civil Code section 3426.4 and Labor Code section 98.2, subdivision (c) both
provide for an award of "reasonable attorney's fees." SWM argues the court erred by not
stating in its ruling the award of attorney fees was reasonable. As with the apportionment
of fees, the determination of the "reasonableness of attorney fees is within the discretion
of the trial court." (Wilkerson v. Sullivan (2002) 99 Cal.App.4th 443, 448.) While the
trial court abuses its discretion by awarding fees that are not reasonable under the facts
and circumstances of the case, there is no requirement that the court's ruling explicitly
state the award is reasonable. (See Yield Dynamics, Inc. v. TEA Systems Corp. (2007)
154 Cal.App.4th 547, 578 ["trial courts need not provide a written explanation of their fee
awards," (italics omitted)].)
Here, both judges considered not only initial briefing by the parties on the fee
motions, but also requested an additional round of briefing and evidentiary submissions,
including detailed time records, concerning the amount of fees to award. In fact, after
initial determinations Plageman, Zellers and Just Add Water were entitled to attorney
fees, each judge continued the motion to require the submission of billing records
specifically to evaluate the reasonableness of the requested amounts. It is clear from this
record the reasonableness of the fees were carefully considered and we find no abuse of
discretion in the amounts awarded.
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DISPOSITION
The judgment is affirmed. Respondents are awarded costs on appeal.
HUFFMAN, J.
WE CONCUR:
BENKE, Acting P. J.
NARES, J.
27
AI Brief
AI-generated · verify before citing
Holding. The court affirmed the judgment against SWM, holding that SWM's failure to pay an exempt employee's salary for his final days of employment precluded its breach of contract claim and that SWM failed to establish a prima facie case of trade secret misappropriation.
Issues
Whether SWM's failure to pay an exempt employee's final salary precluded its breach of contract claim.
Whether there was a triable issue of fact regarding the misappropriation of trade secrets by Just Add Water.
Whether the trial court abused its discretion in its evidentiary rulings regarding summary judgment and trial testimony.
Disposition. Affirmed.
Quotations verified verbatim against the opinion
“We find no error in the trial court's finding that SWM failed to establish a prima facie case of misappropriation of trade secrets by Just Add Water.”
“Summary adjudication of an issue under Code of Civil Procedure section 437c is a judicial determination that the issue is not subject to further controversy in the action and is deemed established at the most critical stage of the action, the trial.”