Superior Court of California 

County of Los Angeles – West District 

Beverly Hills Courthouse / Department 205 

 

 

 

BACKGROUND 

  This case arises from a public records request.  Plaintiff Paymentus Corporation has a master services agreement with Defendant the City of Santa Monica (the “Paymentus Agreement”), under which Paymentus provides electronic bill payment services for a roughly five year term.   

Defendant Todd Brehe, on behalf of Paymentus’ competitor, Nuvei, Inc., submitted a public records request to the City requesting a “copy of the existing merchant services contract” between the City and Paymentus.  Brehe also requested the pricing/fee structure details from the Paymentus Agreement.    

The City provided Paymentus with notice of Brehe’s request and indicated it would produce the Paymentus Agreement, including any amendments, without redaction, unless Paymentus obtained a court order prohibiting the disclosure of the requested information.  At Paymentus’ request, the City agreed to defer disclosing the requested information until Paymentus has had a reasonable opportunity to seek an injunction to maintain the confidentiality of its allegedly trade secret information.   

This hearing is on Paymentus’ motion for preliminary injunction, seeking to enjoin the City from disclosing the negotiated unit pricing terms detailed in the Paymentus’ Agreement.  Paymentus contends the pricing information is trade secret.  The City does not oppose Paymentus’s request for an injunction.         

LEGAL STANDARD 

In determining whether to issue a preliminary injunction, the trial court considers two factors: (1) the reasonable probability that the plaintiff will prevail on the merits at trial; and (2) a balancing of the “irreparable harm” that the plaintiff is likely to sustain if the injunction is denied compared to the harm that the defendant is likely to suffer if the court grants a preliminary injunction.  (C.C.P. §526(a); 14859 Moorpark Homeowner’s Assn. v. VRT Corp. (1998) 63 Cal.App.4th 1396, 1402; Pillsbury, Madison & Sutro v. Schectman (1997) 55 Cal.App.4th 1279, 1283. 

The court must consider both factors.  The two factors are on a sliding scale – the stronger the showing of probability of prevailing, the lesser showing is required for irreparable harm.  (Butt v. State 4 Cal.4th at 678;   The plaintiff must make some showing of each factor. (Jessen v. Keystone Savings & Loan Assn. (1983) 142 Cal.App.3d 454, 459.)  A court may not issue a preliminary injunction if the plaintiff cannot possibly prevail on the merits even if a strong showing of irreparable harm has been made.  (Butt v. State (1992) 4 Cal.4th 668, 677-78.) 

The court’s ruling on a preliminary injunction is not an adjudication of the merits, is not a trial, and does not require a statement of decision.  (Cohen v. Board of Supervisors (1985) 40 Cal.3d 277, 286; People v. Landlords Professional Services, Inc. (1986) 178 Cal.App.3d 68, 70-71.)  The Court is not required to state its reasons for granting or denying a preliminary injunction; a cursory statement is sufficient. (City of Los Altos v. Barnes (1992) 3 Cal.App.4th 1193, 1198.)¿ 

DISCUSSION 

Paymentus has shown a reasonable probability of prevailing on its claim that the pricing information in the Paymentus Agreement is a trade secret and exempt from disclosure.  California appellate courts have routinely recognized that pricing information is a trade secret.  (Whyte v. Schlage Lock Co. (2002) 101 Cal.App. 4th 1443, 1455 (“cost and pricing information not readily known in the industry … was trade secret”); Courtesy Temporary Service Inc. v. Camacho (2012) 222 Cal.App.3d 1278, 1288 (billing and markup rates “irrefutably of commercial value).   

Paymentus expends significant efforts to developing its pricing models and maintaining their confidentiality, which provides it a competitive advantage.  (Tyson Decl. ¶11.)  The pricing information is not generally known outside of Paymentus.  (Id. ¶23.)  Paymentus discloses the pricing information only to select employees who have confidentiality obligations, does not publish the information, and has both physical and digital security protecting the pricing information.  (Id.)  The pricing information is also segregated on Paymentus’ digital system, which requires use of a separate Virtual Private Network (“VPN”) to access Paymentus’ pricing information.  (Id.)  In short, Paymentus has clearly shown its pricing information is a trade secret.   

The Paymentus Agreement contains Paymentus’ trade secret pricing information.  (Id. ¶15.)  In submitting its response to the City’s request for proposal, Paymentus advised the City that its pricing information was confidential: “The contents of this proposal are proprietary and confidential and contain Paymentus trade secret.  No part of this proposal may be shared without prior written consent from Paymentus.”  (Id. ¶26.)  Likewise, the Paymentus Agreement has a confidentiality provision: “[City] will not … disclose to any third party or use any confidential or proprietary non-public information it has obtained through the procurement process or during the term of the Agreement about Paymentus’ business, including the terms of the Agreement, operations, financial condition, technology, systems, know-how, products, services, suppliers, clients, marketing data, plans and models and personnel.”  (Id. ¶27; Ex. A to Tyson Decl. at 7.) 

The pricing that Paymentus proposed and the City accepted in the Paymentus Agreement is different than that of its competitors who generally structure pricing with implementation and/or monthly subscription fees for access to their solutions.  (Id. ¶18.)  Unlike its competitors, Paymentus works with prospective customers like the City to understand the projected volume, type and payment mix of transactions likely to be processed by the prospective customer and then, following substantial internal analysis, determines a pre-transaction price or percentage that covers the costs for implementation and access to the Paymentus payment-processing platform.  (Id.)  Thus, the pricing information in the Paymentus Agreement does not represent a lump sum cost that the City incurs for using Paymentus’s software and services and is more than just the total price it charges for its software products.  The pricing information in the Paymentus Agreement provides details on the components of the software products and the pricing associated with them.  (Id. at ¶19.) 

Paymentus’ pricing information is exempt from disclosure under the Public Records Act (“PRA”).  Section 7927.605 of the California Government Code provides that the PRA should not be construed to require the disclosure of records that are “corporate proprietary information including trade secrets.”  Section 1060 of the California Evidence Code provides that “the owner of a trade secret has a privilege to refuse to disclose the secret and to prevent another from disclosing it, if the allowance of the privilege will not tend to conceal fraud or otherwise work injustice.  Section 7927.705 of the California Government Code also provides that records whose disclosure are “exempted or prohibited pursuant to federal or state law” are expressly exempt from disclosure under the PRA.  

Paymentus has also shown it is likely to suffer irreparable harm should the pricing information be disclosed.  Paymentus invests significant resources in determining the appropriate pricing for its software products in connection with each customer engagement that it enters.  (Id. ¶¶ 16, 20.)  Disclosing Paymentus’ detailed pricing information to its competitors would allow them to adjust their own pricing without having to invest the same resources.  (Id. ¶20.)  It also would give competitors an unfair advantage over Paymentus in future bidding or responses to requests for proposals because the competitors would be able to reverse-engineer Paymentus’ pricing and thereby undercut Payments in other procurements or when Paymentus’ agreements with its clients are up for renewal.  (Id.)  As a result, Paymentus will be irreparably harmed if its trade secret pricing information were disclosed to its competitors including Nuvei, Inc. (Id. ¶35.) 

Disclosure of Paymentus’ pricing information would not be in the public interest.  It may deter other vendors from offering their products or services to the City for fear that their trade secret information could become subject to a public records request and made available to their competitors.  (Id. ¶22.)  Additionally, the disclosure may disincentivize competitors from proposing the lowest prices at which they can deliver their services and instead allow them to determine the minimum price marginally lower than that what Paymentus is offering, to the detriment of the public.  (Id. ¶21.)  Also, if the pricing information were released to the public, the ability of the City and other governmental entities to negotiate lower prices with Payments and its competitors would be diminished in the future.  (Id. ¶22.) 

Based on the foregoing, the Court concludes that an injunction is warranted.  However, Plaintiff has not sufficiently defined the information it seeks to enjoin the City from providing to Brehe.  While Plaintiff repeatedly refers to “Trade Secret Information”, it has not provided a clear definition of the term.  At various points, Plaintiff says the Trade Secret Information “includes” various items (see e.g., Motion at 6:25-26, 10:17-18, 10:26-27) but it fails to provide a complete listing of the terms and information it is seeking to enjoin the City from disclosing.  Likewise, the Proposed Order provides that “Paymentus’s Trade Secret Information shall not be disclosed to any third parties pursuant to a Public Records Act request or otherwise,” but it does not define the capitalized term “Trade Secret Information.”      

A preliminary injunction that is vague and ambiguous is void and cannot be enforced.   

(People v. Columbia Research Corp. (1977) 71 Cal.App.3d 607, 613.)  For this reason, the Court will only issue an injunction as to the information specifically identified in the motion, i.e., the negotiated unit pricing terms detailed in the Paymentus’ agreement.   

CONCLUSION 

Based on the foregoing, the Court GRANTS IN PART and DENIES IN PART Plaintiff’s motion for preliminary injunction.  The Court enjoins the City of Santa Monica from disclosing the unit pricing terms detailed in Plaintiff’s master services agreement with the City (Ex. A to Tyson Decl.).   

IT IS SO ORDERED. 

 

DATED:  April 2, 2024 ___________________________ 

Edward B. Moreton, Jr. 

Judge of the Superior Court