Judge James C. Chalfant, Case 20STCV25402 2022-10-25 Tentative Ruling

Solid Commerce, LLC v. Liquidate Direct, LLC dba Solid Commerce, Eran Pick, and Amir Jacoby, 20STCV25402

Tentative decision on application for writ of possession: granted as turnover order

Plaintiff Solid Commerce, LLC (“Solid”) seeks a writ of possession against Defendant Liquidate Direct, LLC, doing business as Solid Commerce (“Liquidate”) to recover various items identified as “Collateral.”

The court has read and considered the moving papers, opposition, and reply, and renders the following tentative decision.

Plaintiff Solid commenced this proceeding against Liquid, Eran Pick (“Pick”), and Amir Jacoby (“Jacoby”) on August 5, 2022, alleging (1) conversion and (2) claim and delivery. The Complaint alleges as follows.

Defendant Liquidate is a business that provides software solutions to e-commerce merchants. In 2018, Liquidate obtained a $3.4 million loan from lender RCF1, LLC (“RCF1”) (“Loan Agreement”) in exchange for a security interest in all of Liquidate’s personal property (“Collateral”). RCF1 filed a UCC-1 Financing Statement to perfect its claim.

On December 19, 2019, RCF1 and Liquidate entered into a First Amendment to the Loan and Security Agreement (the “First Amendment”) that stated that Liquidate was in default in multiple ways and reaffirmed RCF1’s first-priority perfected continuing security interest in the Collateral.

On February 16, 2022, RCF1 informed Liquidate that it was in default again. On July 28, 2022, RCF-1 provided written notice of its intent to sell the Collateral to satisfy Liquidate’s debt of $3.8 million. Solid submitted the highest bid of $500,000 and entered into a written Bill of Sale and Assignment (“Bill of Sale”) with RCF1. In addition to the Collateral, the Bill of Sale was for (1) all intellectual property developed by Liquidate employees or contractors, (2) all technology platforms, physical or virtual servers, and infrastructure supporting Liquidate’s customers, (3) all Liquidate customer contracts and customers; (4) all Liquidate accounts receivables and bank accounts; and (5) all Liquidate desktop computers, laptops and systems.

After closing and payment, Liquidate refused to surrender the Collateral and claimed that the Bill of Sale did not include bank accounts, customer accounts, software and other personal property it had pledged as Collateral. Liquidate continues to use the Collateral to operate its business and compete with Solid. Without the full Collateral, Solid cannot serve Liquidate’s customers and will suffer in reputation.

Solid seeks (1) a temporary restraining order (“TRO”), preliminary injunction, and permanent injunction to compel Defendants to deliver all the Collateral, not interfere with Solid’s use thereof, and not dispose of the Collateral before delivery, (2) an accounting of all Collateral, (3) compensatory and punitive damages with interest; and (4) attorney’s fees and costs.

On September 16, 2022, Liquidate filed a Cross-Complaint against Solid, Logicbroker Direct, LLC (“Logicbroker”), Peyman Zamani (“Zamani”), and Simon Yu (“Yu”) alleging (1) intentional interference with prospective economic advantage, (2) negligent interference with prospective economic advantage, (3) intentional misrepresentation, (4) negligent misrepresentation, (5) unfair business practices under Business and Professions Code (“Bus. & Prof. Code”) section 17200, and (6) declaratory relief. The Cross-Complaint alleges in pertinent part as follows.

Although Liquidated and RCF1 signed a Loan Agreement that gave RCF1 a security interest in the Collateral, the security interest did not include any customer information or goodwill such as Liquidate's customer lists, customer information, or passwords. Liquidate defaulted on the loan, prompting RCF1 to serve written notice of its intent to sell the Collateral.

During the bidding, Liquidate communicated with multiple bidders to increase the bid value, including Solid. Before the foreclosure, Solid made salary requests to Liquidate employees in order to know what would be required to retain them and agreed to grant the requests if it prevailed. The other bidders learned of the requests and decided to not bid because the Liquidate team was necessary to preserve the Collateral’s value. This reduced the amount of the sale price to $500,000 as Solid was the only bidder at the sale. After it won the bidding, Solid said it would not pay the salary requests.

On July 29, 2022, Zamani emailed Liquidate to demand physical access to all company-owned assets. Zamani also attached notice that Logicbroker acquired Liquidate. This was false because (1) Solid bought the Collateral, not Logicbroker, and (2) Solid did not buy Liquidate.

On August 1, 2022, Zamani sent an email to all Liquidate employees and Liquidate leaders, reiterating that Logicbroker had acquired Liquidate. The email repeated the falsehood that Logicbroker had acquired the entire company, and Zamani and Yu phoned numerous Liquidate employees to that effect.

Liquidate seeks (1) damages, (2) pre-judgment and post-judgment interest, (3) punitive damages, (5) an order prohibiting Logicbreaker, Solid, Yu, and Zamani from contacting Liquidate’s employees and customers, (6) declaratory relief, and (7) attorney’s fees and costs.

On August 8, 2022, Solid served Liquidate with the Complaint and Summons by substitute service, effective August 18, 2022.

On August 10, 2022, Solid filed an ex parte application for a TRO and order to show cause re: a preliminary injunction (“OSC”) (1) enjoining Liquidate from disposing of or otherwise using any of the Collateral until delivery to Solid, and (2) compelling Liquidate to deliver the Collateral to Solid, including the software and source code, and (3) enjoining Liquidate from interfering with use of the Collateral. This court denied the application on August 11, 2022 and held that a writ of possession would be the appropriate relief.

On September 16, 2022, Liquidate filed and served its Answer to the Complaint and its Cross-Complaint.

A writ of possession is issued as a provisional remedy in a cause of action for claim and delivery, also known as replevin. See Pillsbury, Madison & Sutro v. Schectman, (1997) 55 Cal.App.4th 1279, 1288. As a provisional remedy, the right to possession is only temporary, and title and the right to possess are determined in the final judgment.

A writ of possession is available in any pending action. It also is available where an action has been stayed pending arbitration, so long as the arbitration award may be ineffectual without provisional relief. See CCP §1281.7.

Upon the filing of the complaint or at any time thereafter, a plaintiff may apply for an order for a writ of possession. Unlike attachment, where Judicial Council forms are optional, the parties must use the mandatory approved Judicial Council forms in a claim and delivery proceeding. (Judicial Council Forms CD-100 et seq.).

A plaintiff must make a written application for a writ of possession. CCP §512.010(a), (b); (Mandatory Form CD-100); CCP §512.010(a). A verified complaint alone is insufficient. 6 Witkin, California Procedure, (5th ed. 2008) §255, p.203. As a proceeding “on application before trial for an order,” a writ of possession qualifies as a Law and Motion. Cal. Rules of Court, Rule 3.1103(a). As such, it must also be accompanied by a memorandum in support of the motion. Cal. Rules of Court, Rule 3.1112(a)(3), 3.1113(a). The application may also be supported by declarations and/or a verified complaint. CCP §516.030. The declarations or complaint must set forth admissible evidence except where expressly permitted to be shown on information and belief. Id.

The application must be executed under oath and include: (1) A showing of the basis of the plaintiff's claim and that the plaintiff is entitled to possession of the property claimed. If the plaintiff's claim is based on a written instrument, a copy of it must be attached; (2) A showing that the property is wrongfully detained by the defendant, how the defendant came into possession of it, and, the reasons for the detention based on the plaintiff’s best knowledge, information, and belief; (3) A specific description of the property and statement of its value; (4) The location of the property according to the plaintiff’s best knowledge, information, and belief. If the property, or some part of it, is within a private place which may have to be entered to take possession, a showing of probable cause to believe that the property is located there; and (5) A statement that the property has not been taken for (a) a tax, assessment, or fine, pursuant to a statute, or (b) an execution against the plaintiff’s property. Alternatively, a statement that if the property was seized for one of these purposes, it is by statute exempt from such seizure. CCP §512.010(b).

Before noticing a hearing, the plaintiff must serve the defendant with all of the following: (1) A copy of the summons and complaint; (2) A Notice of Application and Hearing; and (3) A copy of the application and any supporting declaration. CCP §512.030(a). If the defendant has not appeared in the action, service must be made in the same manner as service of summons and complaint. CCP §512.030(b).

Each party shall file with the court and serve upon the other party any declarations and points and authorities intended to be relied upon at the hearing. CCP §512.050. At the hearing, the court decides the merits of the application based on the pleadings and declarations. Id. Upon a showing of good cause, the court may receive and consider additional evidence and authority presented at the hearing or may continue the hearing for the production of such additional evidence, oral or documentary, or the filing of other affidavits or points and authorities. Id.

The court may order issuance of a writ of possession if both of the following are found: (1) The plaintiff has established the probable validity of the plaintiff’s claim to possession of the property; and (2) The undertaking requirements of CCP section 515.010 are satisfied. CCP §512.060(a). “A claim has ‘probable validity’ where it is more likely than not that the plaintiff will obtain a judgment against the defendant on that claim.” CCP §511.090. This requires that the plaintiff establish a prima facie case; the writ shall not issue if the defendant shows a reasonable probability of a successful defense to the claim and delivery cause of action. Witkin, California Procedure, (5th ed. 2008) §261, p.208. A defendant’s claim of defect in the property is not a defense to the plaintiff’s right to possess it. RCA Service Co. v. Superior Court, (1982) 137 Cal.App.3d 1, 3.

No writ directing the levying officer to enter a private place to take possession of any property may be issued unless the plaintiff has established that there is probable cause to believe that the property is located there. CCP §512.060(b).

The successful plaintiff may obtain a preliminary injunction containing the same provisions as a TRO that remains in effect until the property is seized by the levying officer.[1] CCP §513.010(c).

The court may also issue a “turnover order” directing the defendant to transfer possession of the property to the plaintiff (See Mandatory Form CD-120). The order must notify the defendant that failure to comply may subject him or her to contempt of court. CCP §512.070. The turnover remedy is not issued in lieu of a writ, but in conjunction with it to provide the plaintiff with a less expensive means of obtaining possession. See Edwards v Superior Court, (1991) 230 Cal.App.3d 173, 178.

Generally, the court cannot issue an order for a writ of possession until the plaintiff has filed an undertaking with the court (Mandatory Form CD-140 for personal sureties). CCP §515.010(a). The undertaking shall provide that the sureties are bound to the defendant for the return of the property to the defendant, if return of the property is ordered, and for the payment to the defendant of any sum recovered against the plaintiff. Id. The undertaking shall be in an amount not less than twice the value of the defendant's interest in the property or in a greater amount. Id. The value of the defendant's interest in the property is determined by the market value of the property less the amount due and owing on any conditional sales contract or security agreement and all liens and encumbrances on the property, and any other factors necessary to determine the defendant’s interest in the property. Id.

However, where the defendant has no interest in the property, the court must waive the requirement of the plaintiff’s undertaking and include in the order for issuance of the writ the amount of the defendant’s undertaking sufficient to satisfy the requirements of CCP section 515.020(b). CCP §515.010(b).

In February 2018, Liquidate obtained a $3.4 million loan from RCF1. Beach Decl., ¶4, Ex. 2. The Loan Agreement defined “Collateral” as any and all properties, rights and assets of Liquidate, including: (1) “All goods, accounts, Equipment, Inventory, contract rights or rights to payment of money, leases, license agreements, franchise agreements, General Intangibles (including Intellectual Property and payment intangibles), commercial tort claims, documents, instruments (including any promissory notes), chattel paper (whether tangible or electronic), cash, Deposit Accounts, fixtures, letters of credit rights (whether or not the letter of credit is evidenced by a writing), Securities Accounts, securities and all other investment property, supporting obligations and financial assets, whether now owned or hereafter acquired, wherever located;” and (2) all of Liquidate’s financial books that relate to such property as well as all claims and interests therein and all substitutions for, additions, attachments, accessories, accessions and improvements to and replacements, products, proceeds and insurance proceeds of any such property. Beach Decl., ¶4, Ex. 2, pp. 24, A-1.

The Loan Agreement defined the term “General Intangibles” as in the Uniform Commercial Code (“UCC”), such that it includes all “Intellectual Property, claims, income and other tax refunds, security and other deposits, payment intangibles, contract rights, options to purchase or sell real or personal property, rights in all litigation presently or hereafter pending (whether in contract, tort or otherwise), insurance policies (including key man, property damage and business interruption insurance), payments of insurance and rights to payment of any kind.” Beach Decl., ¶4, Ex. 2, p. 26.

“Intellectual Property” was defined to include all rights and interest in (1) copyrights, trademark, and patents; (2) trade secrets such as unpatented inventions, know-how, and operating manuals; (3) source code; (4) design rights that either Liquidate or a subsidiary owns; (5) claims for damages by way of infringement of such rights and the right to sue for such infringement; and (6) all amendments, renewals and extensions of any of the Copyrights, Trademarks or Patents. Beach Decl., ¶4, Ex. 2, p. 27.

The Loan Agreement’s Data Privacy clause provided that Liquidate had complied with all applicable privacy laws governing the collection, storage, transfer, and use of personally identifiable information from any individuals, including, without limitation, any customers, prospective customers, employees and/or other third parties (“Personal Information”). Beach Decl., ¶4, Ex. 2, p. 8 (§5.13).

The parties acknowledged that they and their attorneys participated in the preparation and negotiation of the Loan Agreement. Beach Decl., ¶4, Ex. 2, p. 23 (§12.12).

On December 19, 2019, after RCF1 informed Liquidate that it defaulted on the Loan Agreement multiple times since March 2018, RCF1 and Liquidate executed the First Amendment. Beach Decl., ¶4, Ex. 3, p.1. Per the First Amendment, Liquidate reaffirmed that the Loan Agreement remained in effect, including RCF1’s first-priority perfected security interest in the Collateral and any replacements or additions thereto since the Loan Agreement. Beach Decl., ¶4, Ex. 3.

On February 16, 2022, RCF1 sent Liquidate notice that it defaulted on the Amended Loan Agreement. Beach Decl., ¶3, Ex. 1, p. 2. On June 28, 2022, RCF1 sent Liquidate notice of its intent to sell and dispose of the Collateral (“Notice”). Beach Decl., ¶3, Ex. 1. The Notice asserted that Liquidate owed it $3.8 million plus interest and attorney’s fees and costs. Beach Decl., ¶3, Ex. 1, p. 2. It gave bidders until July 25 to present a non-revocable written offer and cash deposit. Beach Decl., ¶3, Ex. 1, p. 2. Liquidate never disputed the Notice. Beach Decl., ¶5; Yu Decl., ¶5.

Before any acquisition, Solid’s Vice-President Simon Yu (“Yu”) met with Liquidate’s principals Eran Pick (“Pick”) and Amir Jacoby (“Jacoby”) met to discuss Liquidate’s business to determine if Solid should submit a bid. Yu Decl., ¶3. Liquidate’s principals outlined its software and other business systems and the discussions were informative. Yu Decl., ¶4.

Solid submitted a written bid to acquire the Collateral for $500,000 and won. Beach Decl., ¶¶ 6-7. Solid and RCF1 executed the Bill of Sale on July 29, 2022, which tracked the description of the Collateral in the Loan Agreement. Beach Decl., ¶8, Ex. 4 (Ex. C); Yu Decl., ¶6. The Bill of Sale also clarified that the Collateral includes: (1) all intellectual property developed by Liquidate employees or contractors; (2) all technology platforms, physical or virtual servers and infrastructures supporting Liquidate customers; (3) all Liquidate customer contracts and customers; (4) all Liquidate accounts receivables and bank accounts; and (5) all Liquidate desktop computers, laptops and systems. Beach Decl., ¶9, Ex. 4.

On July 29, 2022, Solid retained counsel to send a letter to Liquidate requesting that it transfer the Collateral, grant access to its assets, and cease use of the assets that Solid had acquired through the Bill of Sale. Beach Decl., ¶11, Ex. 5. Liquidate did not comply. Beach Decl., ¶12.

On August 1, 2022, Liquidate’s counsel wrote that some of the items in the Bill of Sale were not Collateral that RCF1 could sell. Beach Decl., ¶13, Ex. 6. This included: (1) customer contact information; (2) customer credit card information; and (3) any account ID or password that would provide access to that information. Beach Decl., ¶13, Ex. 6. RCF1’s UCC-1 does not include trade secrets, customer information, or “goodwill” and it is not part of the Collateral. Beach Decl., ¶13, Ex. 6.

On August 2, 2022, Solid responded that the UCC-1 perfected the interest in all Collateral in the Loan Agreement. Beach Decl., ¶13, Ex. 6. The Collateral includes “General Intangibles,” which the Loan Agreement defined to include “Intellectual Property” and whatever else the UCC defines as general intangibles, which includes payment intangibles and software. Beach Decl., ¶13, Ex. 6. Liquidate’s customer information, accounts, and password information were part of the Collateral purchased by Solid. Beach Decl., ¶13, Ex. 6.

On August 8, 2022, Liquidate’s counsel conceded that Solid had purchased deposit accounts and source code. Beach Decl., ¶13, Ex. 6. Liquidate needed until October to remove personal information and other information from the source code, and when Pick returned in September he would close the deposit accounts and send the balance to Solid. Beach Decl., ¶13, Ex. 6.

Liquidate maintained that Solid did not acquire passwords, credit card information, and customer information (“Confidential Information”). Beach Decl., ¶13, Ex. 6. Under the Loan Agreement, Collateral could be either payment intangibles or trade secrets. Beach Decl., ¶13, Ex. 6. Payment intangibles are general intangibles under which the account debtor’s principal obligation is monetary. Beach Decl., ¶13, Ex. 6. The Confidential Information is not a right to payment and thus does not qualify as a payment intangible. Beach Decl., ¶13, Ex. 6. As to trade secrets, the Loan Agreement took care to identify Confidential Information as “Personal Information,” and Personal Information is not in the list of Collateral. Beach Decl., ¶13, Ex. 6.

To date, Liquidate has not transferred any personal property and Solid has not been given access to any of Liquidate’s accounts. Yu Decl., ¶9. Without the full Collateral, Solid cannot serve Liquidate’s customers and will suffer in reputation. Yu Decl., ¶¶ 10-11.

In its opposition to Solid’s ex parte application for a TRO, Liquidate agreed that Solid is entitled to its (a) bank accounts and statements, (b) accounts receivables, (c) source code, (d) software, and (e) physical assets. Schechter Decl., ¶4, Ex. 1. Liquidate’s opposition stated that it just needed more time before it could turn those over, in part because Pick was overseas. Schechter Decl., ¶4, Ex. 1.

The Loan Agreement did not include customer information or goodwill such as Liquidate's customer lists, customer information, or passwords. Pick Decl., ¶3.

On July 28, 2022, Zamani as Logicbroker’s CEO emailed Liquidate leadership that Logicbroker was excited to have acquired Liquidate and to welcome it to the Logicbroker team. Pick Decl., ¶13, Ex. 1.

On July 29, 2022, Zamani emailed Liquidate to demand physical access to all company owned assets, with servers as the main priority. Pick Decl., ¶13, Ex. 1. This included bank, credit card, and Azure accounts, although for most accounts user IDs and passwords would suffice. Pick Decl., ¶13, Ex. 1.

Also on July 29, 2022, Zamani sent a frequently asked questions (“FAQ”) sheet that informed the reader of Logicbroker’s acquisition of Liquidate but assured employees that work roles would not change and that the branding remained Liquidate/Solid Commerce. Pick Decl., ¶14, Ex. 2. He also provided a brochure stating that Pick would report to Zamani as the Marketplace Vice-President but otherwise the organizational structure would not change. Pick Decl., ¶15, Ex. 3. The presentation included an outline of next steps for employees and contractors, who should receive Logicbroker employment offers soon. Pick Decl., ¶15, Ex. 3. Zamani explained that these offer letters reflected the information Liquidate’s team shared with Logicbroker. Pick Decl., ¶16, Ex. 4.

On August 1, 2022, Zamani sent an email to all Liquidate employees, Pick, and other Liquidate leaders, reiterating that Logicbroker had acquired Liquidate. Pick Decl., ¶16, Ex. 4. Any Liquidate employee therefore no longer provided services to Solid in his or her capacity as a Liquidate employee and any changes to Liquidate accounts required the approval of a designated employee. Pick Decl., ¶¶ 16-17, Ex. 4. The email reiterated that those employees who did not yet receive the offer to join the Logicbroker team would receive it soon. Pick Decl., ¶17, Ex. 4.

On August 2, 2022, Zamani sent another email to the Liquidate team asserting that since acquiring Liquidate, Zamani has tried to get the Liquidate team to meet and agree to work with Logicbroker, and that employment offers had been sent to every team member. Pick Decl., ¶18, Ex. 5.

Solid is a subsidiary of Logicbroker but has not assigned or transferred its rights to own or possess the Collateral to Logicbroker or any other entity. Reply Zamani Decl., ¶¶ 2-3. Zamani is Solid’s CEO. Zamani Decl., ¶1.

Plaintiff Solid seeks a writ of possession for all Collateral identified in the Loan Agreement, including bank accounts and statements, accounts receivables, source code, software, and physical assets as well as Confidential Information. Solid also seeks a turnover order for this Collateral.

Liquidate asserts that Zamani, acting on behalf of Ligicbroker, informed Liquidate and its employees that it owns and controls Solid and Logicbroker must approve any changes to the accounts. Pick Decl., ¶¶ 15-16, Exs. 2-4. As a result, Liquidate concludes that Solid is not the owner of the Collateral and therefore has no standing. Opp. at 2.

Solid acknowledges that it is a subsidiary of Logicbroker. Reply at 3; Zamani Decl., ¶3. However, that fact does not change Solid’s rights. Solid submitted the winning bid for the Collateral and purchased it through the Bill of Sale. While Zamani, who is the CEO of both Solid and Logicbroker, stated that Logicbroker controlled Liquidate’s business, there is no evidence that Solid assigned its rights to Logicbroker. Solid retains standing to bring the application.

Liquidate does not dispute that it defaulted on the Loan Agreement and that Solid purchased the Collateral as the highest bidder. Pick Decl., ¶¶ 5-6, 9-10.[5]

The application for a writ of possession must provide a particular description of the proerpty and a statement of its value. CCP §512.010(b).

In describing the property to be attached, Solid’s application quotes the definition of the Collateral in the Loan Agreement: (1) “All goods, accounts, Equipment, Inventory, contract rights or rights to payment of money, leases, license agreements, franchise agreements, General Intangibles (including Intellectual Property and payment intangibles), commercial tort claims, documents, instruments (including any promissory notes), chattel paper (whether tangible or electronic), cash, Deposit Accounts, fixtures, letters of credit rights (whether or not the letter of credit is evidenced by a writing), Securities Accounts, securities and all other investment property, supporting obligations and financial assets, whether now owned or hereafter acquired, wherever located;” and (2) all of Liquidate’s financial books that relate to such property as well as all claims and interests therein and all substitutions for, additions, attachments, accessories, accessions and improvements to and replacements, products, proceeds and insurance proceeds of any such property. Beach Decl., ¶4, Ex. 2.

Liquidate asserts that this is not a sufficiently specific description. Opp. at 8. As Solid notes (Reply at 7), the description is sufficiently specific to inform Liquidate of the property sought. Liquidate can identify, and has identified, the claimed property it does not dispute and that which it does dispute. Opp. at 5.

Liquidate also suggests (but does not actually argues) that the application fails to state the Collateral’s value. Opp. at 8. The court does not agree. The application incorporates by reference the supporting declarations which describe the purchase price for the Collateral as $500,000. Beach Decl., ¶6, Ex. 4. This suffices.

The application shall include a statement, according to the plaintiff’s information and belief, of the location of the property. CCP §512.010(b)(4).

Liquidate asserts that the application does not stated the location of the Collateral. Opp. at 8. Solid asserts that Liquidate admits that it has the Collateral and has not said where it is located. Reply at 8; Beach Decl., ¶13, Ex. 6.

This is insufficient to meet the requirements of CCP section 512.010(b)(4), which is to enable the levying officer to go to a particular location. However, Solid is correct that it can still obtain a turnover order without identifying the property’s location.

Solid provides evidence that in opposing Solid’s ex parte application for a TRO, Liquidate admitted that the Collateral to (a) bank accounts and statements, (b) accounts receivables, (c) source code, (d) software, and (e) physical assets. Schechter Decl., ¶5, Ex. 1. Liquidate’s opposition does not defend against these items, and Solid is correct that it has established the probable validity of its claim for them. Reply at 5.

The items in dispute consist of customer pricing and contact information (“Customer Information”) and whether it was included in the Loan Agreement’s definition of Collateral. App. at 4; Opp. at 3.[6]

Liquidate notes that the Loan Agreement defines “Collateral” in pertinent part as including “General Intangibles (including Intellectual Property and payment intangibles)”. Ex. A. Beach Decl., ¶4, Ex. 2, pp. 24, A-1. The Loan Agreement defines “General Intangibles” in pertinent part as in the UCC such that it includes all “Intellectual Property and payment intangibles. Beach Decl., ¶4, Ex. 2, p. 26. “Intellectual Property” is defined in pertinent part to include “any and all trade secrets and trade secret rights, including any rights to unpatented inventions, know-how, and operating manuals”. Beach Decl., ¶4, Ex. 2, p. 27.

Liquidate argues that its Customer Information can only be within the definition of Collateral if it is payment intangibles or trade secrets. The Customer Information is not a payment intangible, which is a contractual right to payment. In re Wiersma, (9^th Cir 2005) 324 Bankruptcy Reporter 92,106-07. The Loan Agreement does not define trade secrets, and the issue is whether the parties to the Loan Agreement intended to include Customer Information as a trade secret in the definition of Collateral. Liquidate argues that they did not, noting that another portion of the Loan Agreement, the Data Privacy clause, took great care in identifying the personally identifiable information of customers, employees, and third parties as “Personal Information”. Since the Loan Agreement did not refer to customer information or Personal Information as part of the Collateral, it should not be included within the trade secrets mentioned in the definition of Intellectual Property. Opp. at 7.

Liquidate’s position is untenable. It concedes that trade secrets are part of the definition of Intellectual Property and hence are General Intangibles that are part of the Collateral. The term “trade secret” The California Uniform Trade Secrets Act (“UTSA”) (Civil Code §3426.1 et seq.) defines a “trade secret” as information, including a formula, pattern, compilation, program, device, method, technique, or process, that (1) derives independent economic value from not being generally known to the public or competitors and (2) is the subject of reasonable efforts to maintain its secrecy. Civil Code §3426.1(d). Confidential customer contact information is a trade secret. Morlife, Inc. v. Perry, (1997), 56 Cal.App.4th 1514, 1526 (permanent injunction preventing former employee from dealing with any of 32 customers of plaintiff that were unlawfully solicited). An agent or employee must protect an employer’s confidential customer information. See Reid v. Mass Co., Inc., supra, 15 Cal.App.2d at 302. Strategic and marketing plans, marketing research, price concessions, trade discounts, and rebate information can be trade secrets. Schlage v. White, (2002) 101 Cal.App.4th 1443, 1455-56.

As Solid argues (Reply at 5-6), the Collateral broadly includes “any and all trade secrets” and there is no question that Liquidate seeks to protect the Customer Information as secret. Courts should interpret a contract based on the usual and ordinary meaning of the contractual language and the circumstances under which the agreement was made. Rice v. Downs, (2016) 248 Cal. App. 4th 175, 185-86. Thus, the phrase “any and all trade secrets” includes Customer Information. The Loan Agreement’s failure to use the term “Personal Information” as defined in an otherwise inapplicable Data Privacy clause that assured the lender that Liquidate was adequately protecting privacy rights does not reflect the parties’ intent in defining what is Collateral.

The Customer Information is a part of the Collateral and Solid has shown a probability of success on its claim.

Liquidate asserts that a writ of attachment, not a writ of possession, is the proper remedy because CCP section 487.010(a) permits attachment of corporate property for which a method of levy is permitted by Article 2 of Chapter 8, commencing with section 488.300 which only lists tangible property. Opp. at 9.

Liquidate’s argument that only tangible property can be subject to a writ of possession is unsupported. In reply, Solid admits that property cannot be seized unless it is tangible and argues that intangible Collateral – such as software and source code – may be seized because they can be stored on hard drives capable of identification and seizure. Reply at 8.

It is undisputed that the Customer Information at issue is in tangible form and a writ of possession may govern its turnover.

The application for a writ of possession is granted for a turnover of the Collateral, including bank accounts and statements, accounts receivables, source code, software, physical assets, and Customer Information. Liquidate is directed to turnover these items to Solid by September 30, 2022. See Edwards v Superior Court, (1991) 230 Cal.App.3d 173, 178. As Liquidate has no legal interest in the Collateral, its undertaking is waived. Any undertaking by Liquidate to prevent the turnover under CCP sections 515.010(b) and 515.020(b) would have to be discussed with counsel.

Solid has not submitted a writ of possession with a turnover order on Mandatory Form CD-120 and must do so within two court days, or it will be waived.

[1] If the court denies the plaintiff’s application for a writ of possession, any TRO must be dissolved. CCP §513.010(c).

[2] The court has ruled on Liquidate’s written objections to Solid’s evidence. The clerk is directed to scan and electronically file the rulings.

[3] The court has not included facts that support Liquidate’s cross-claims but are irrelevant to the application for a writ of possession.

[4] The argument that the application must be denied in full because Solid has not proven its right to the Collateral (Opp. at 4, 7) presupposes that the court sustains Liquidate’s objections to Solid’s evidence. As the court has ruled on this objection, it does not discuss this argument.

[5] Liquidate does argue that the Declaration of James Beach is not executed, and the Loan Agreement is incomplete because it is missing executed exhibits B-D and a copy of exhibit F. Opp. at 4. The Beach declaration on file was executed and the missing or unexecuted exhibits are immaterial to the application where Liquidate admits that Solid purchased the Collateral.

[6] Liquidate also states that passwords are in issue but never specifically what software or accounts the passwords are for, nor defends against their turnover. See Opp. at 3.