Judge Kerry Bensinger, Case Number: BC551112, Date: 2023-11-08 Tentative Ruling

On July 9, 2014, Plaintiff, Pine Valley, Inc., filed a Complaint against Defendants, Ajinomoto North America, Inc., Ajinomoto Frozen Foods, U.S.A, Inc., and Trader Joe’s Company, alleging causes of action for (1) breach of written contract, (2) intentional interference with prospective economic advantage, (3) fraud, (4) negligent misrepresentation, (5) unfair competition, (6) breach of fiduciary duty, (7) aiding and abetting breach of fiduciary duty, (8) violation of California Uniform Trade Secrets Act, and (9) misappropriation of confidential and/or proprietary information.

On January 28, 2016, Plaintiff won a jury verdict against Ajinomoto North America, Inc. and Ajinomoto Frozen Foods, U.S.A, Inc. (“Defendants”). The jury found, among other things, that Defendants willfully and maliciously misappropriated Plaintiff’s trade secret for frozen-chicken fried rice and frozen-vegetable fried rice (the “Trade Secrets”). The Court also found that Defendants should pay a reasonable royalty. The parties stipulated to a royalty of 4% of gross sales from the Trade Secrets sold and to be sold by Defendants starting from January 28, 2016.

On November 10, 2016, the Court found that the royalty payments were to start on January 28, 2016 and to continue for so long as Defendants sell the Trade Secrets. On November 10, 2016, the Court issued an order, which provided in relevant part, that Defendants would not be required to pay the royalty when the Trade Secrets cease to exist.

On February 28, 2017, the Court entered judgment against Defendants (hereafter, “Judgment Debtors”), which included the royalty payments (the “Judgment”).

On May 11, 2017, the parties filed appeals. Plaintiff (hereafter, “Judgment Creditor”) appealed from orders denying its ability to recover punitive damages; Judgment Debtors appealed (1) the verdict and all of the causes of action (2) the royalty award, and (3) the dismissal with prejudice of Judgment Debtors’ cross-complaint against Judgment Creditor.

On April 9, 2019, the Court of Appeal affirmed the the Judgment against Judgment Debtors in all respects to all the causes of action, including the royalty award, and affirmed the dismissal of Judgment Debtors’ cross-complaint. The Court of Appeal denied Judgment Creditor’s right to pursue punitive damages.

On June 10, 2019, Judgment Creditor filed an Acknowledgement of Partial Satisfaction of Judgment in the amount of $7,476,644.28. Concurrently, the parties executed a signed stipulation stating, in part, that the Judgment is partially satisfied, excluding (1) the ongoing equitable royalty that Judgment Debtors owe to Judgment Creditor accruing after March 31, 2019, (2) any attorney’s fees on appeal that may be awarded to Judgment Creditor upon a timely filed motion, and (3) such other motion as Judgment Creditor may file regarding the royalty provision of the judgment. The stipulation was signed by the Court on July 25, 2019.

On September 8, 2023, Judgment Creditor filed an Affidavit for Order for Appearance and Examination of Third Party Ajinomoto Foods North America, Inc. (“Ajinomoto Foods”). In the affidavit, Judgment Creditor states that it recently discovered that the corporate status of Judgment Debtors, Ajinomoto North America, Inc. and Ajinomoto Frozen Foods, U.S.A., Inc., was terminated on April 7, 2015, and November 30, 2015, respectively. Judgment Creditor believes another entity, Ajinomoto Foods, is manufacturing and selling significant amounts of frozen fried rice products to Trader Joe’s. Judgment Creditor seeks to conduct the examination of third party Ajinomoto Foods to determine if it has succeeded to the rights and obligations of the Judgment Debtors.

On September 26, 2023, Judgment Creditor filed an Application and Order for Appearance and Examination of Hiroshi Kaho, Chief Executive Officer of Ajinomoto Foods. The third-party examination was scheduled for October 30, 2023. Judgment Creditor also served Mr. Kaho with a Civil Subpoena (Duces Tecum) for Personal Appearance and Production of Documents (the “Subpoena”) for the October 30, 2023 third-party examination.

On October 26, 2023, Mr. Kaho filed this Motion for a Protective Order. The Motion seeks to vacate the October 30 examination and quash the subpoena. Mr. Kaho did not include a notice of motion.

The Application and Order for Appearance and Examination came on for hearing on October 30, 2023. Mr. Kaho did not appear. A bench warrant was ordered and held until December 13, 2023, and the hearing was continued to the same date.

On November 22, 2023, Mr. Kaho filed a Reply and a Notice of Errata which provides the omitted notice of motion.

a) Upon ex parte application by a judgment creditor who has a money judgment and proof by the judgment creditor by affidavit or otherwise to the satisfaction of the proper court that a third person has possession or control of property in which the judgment debtor has an interest or is indebted to the judgment debtor in an amount exceeding two hundred fifty dollars ($250), the court shall make an order directing the third person to appear before the court, or before a referee appointed by the court, at a time and place specified in the order, to answer concerning such property or debt. The affidavit in support of the judgment creditor's application may be based on the affiant's information and belief.

b) Not less than 10 days prior to the date set for the examination, a copy of the order shall be:
(1) Served personally on the third person.

c) If the property in the third person’s possession or control in which the judgment debtor has an interest or the debt owed by the third person to the judgment debtor is described in the affidavit or application for an order under subdivision (a) in a manner reasonably adequate to permit it to be identified, service of the order on the third person creates a lien on the judgment debtor’s interest in the property or on the debt for a period of one year from the date of the order unless extended or sooner terminated by the court.

“Judgment debtor examinations serve an important function in our judicial system.” (Jogani v. Jogani (2006) 141 Cal.App.4th 158, 172.) During these examinations, the judgment creditor is afforded “the widest scope for inquiry concerning property and business affairs of the debtor ....” (Young v. Keele (1987) 188 Cal.App.3d 1090, 1093.) “The object of the proceeding is to compel the judgment debtor to give information concerning his property; and such judgment-debtor examination is intended to be summary and factual, according the widest scope for inquiry concerning the property and business affairs of the judgment debtor. [Citations.] The purpose of such supplementary proceedings is to discover and reach assets of a judgment debtor so as to apply them to the satisfaction of the judgment. [Citations.]” (Liv. Yan (2016) 247 Cal.App.4th 56, 66; Kyne v. Eustice (1963) 215 Cal.App.2d 627, 632.)

“[I]n the context of postjudgment enforcement proceedings, ‘the use of a subpoena duces tecum to discover and inspect relevant documents is an accepted practice’” (Shrewsbury Mgmt., Inc. v. Superior Court (2019) 32 Cal.App.5th 1213, 1225.) “[S]ince the scope of a judgment debtor examination under section 708.110 has been interpreted to permit a wide scope of inquiry into the judgment debtor’s finances [cite], it follows that the scope of a subpoena duces tecum served on a third party that is tethered to the examination of the judgment debtor ... must be similarly broad.” (Id.) Thus, ‘when a subpoena duces tecum is tethered to an examination [of the judgment debtor] under section 708.110, the scope of discoverable documents must be ‘broadly construed to include matters relating to the ‘property and business affairs of the judgment debtor’ [citation], ... and is not limited by section 708.120.” (Id. at p. 1228.)

Pursuant to Code of Civil Procedure section 1987.1, judgment creditors are entitled to an order directing compliance with the subpoena duces tecum specifying the documents to be produced at the judgment debtor examination. Nevertheless, “the court may, on motion of the person to be examined or on its own motion, make such protective orders as justice may require.” (Code Civ. Proc., § 708.200.)

Judgment Creditor request judicial notice of eight documents. The unopposed request is GRANTED. (Evid. Code, 452, subds. (a), (d).)

Mr. Kaho seeks a protective order because Judgment Creditor’s money judgment has been satisfied.[1]

The Court finds issuance of a protective order is warranted. First, the money judgment has been satisfied. Code of Civil Procedure section 680.270 defines a money judgment as “that part of a judgment that requires the payment of money.” The amount of any judgment must be computed and stated in “dollars and cents.” (Code Civ. Proc., § 577.5.) It must be stated with certainty. (In re Estate of Kampen (2011) 201 Cal.App.4th 971, 986; Guess v. Bernhardson (2015) 242 Cal.App.4th 820, 831.) Here, the money judgment is set forth in paragraph A of the February 28, 2017 Judgment. Paragraph A provides that judgment is to be entered in favor of Judgment Creditor against Judgment Debtors in the amount of $1,400,000. (2/28/2017 Judgment.) On June 10, 2019, Judgment Creditor filed an Acknowledgement of Partial Satisfaction of Judgment in the amount of $7,476,644.28. Concurrently, the parties stipulated that Judgment Creditor’s judgment was partially satisfied, excluding (1) the ongoing equitable royalty that Defendants owe to Judgment Creditor accruing after March 31, 2019, (2) any attorney’s fees on appeal that may be awarded to Judgment Creditor upon a timely filed motion, and (3) such other motion as Judgment Creditor may file regarding the royalty provision of the judgment. The parties do not dispute that cost, prejudgment interest, and attorney fee awards have all been satisfied. As such, Judgment Creditor no longer has a money judgment. The reasonable royalty provision is the only remaining provision of the Judgment.

Further, an award of a reasonable royalty is an injunctive remedy. “Under the [California Uniform Trade Secrets Act], reasonable royalties are allowed in two situations. In the context of injunctive relief reasonable royalties may be imposed where it would be unreasonable to enjoin future use of a misappropriated trade secret. (§ 3426.2, subd. (b).) When calculating a monetary remedy for the past use of a misappropriated trade secret, a court “may order” reasonable royalties ‘[i]f neither damages [for actual loss] nor unjust enrichment caused by misappropriation are provable.’ (§ 3426.3, subd. (b).)” (Ajaxo Inc. v. E*Trade Fin. Corp. (2010) 187 Cal. App. 4th 1295, 1308.)

Here, the Court imposed a reasonable royalty because it was unreasonable to enjoin future use of Judgment Creditor’s Trade Secrets. Paragraph H of the Judgment confirms that the Court contemplated the imposition of a reasonable royalty as an injunctive remedy as it references Judgment Debtors’ ability to seek relief from the royalty provision of the Judgment pursuant to Civil Code section 3426.2. The plain terms of Civil Code section 3426.2, subdivision (b), in particular, make clear that a reasonable royalty is not a money judgment as it is imposed when neither damages nor unjust enrichment are provable. In other words, a reasonable royalty is imposed because the damages or unjust enrichment cannot be stated with certainty. As an injunctive remedy, the reasonable royalty provision of the Judgment is not a money judgment. Judgment Creditor does not specifically address this argument distinguishing reasonable royalties from money judgments.

Even if a reasonable royalty may be considered a money judgment, a protective order is warranted because Judgment Creditor does not satisfy Section 708.120, subdivision (a). That section authorizes a third-party examination when “the judgment creditor [shows] by affidavit or otherwise to the satisfaction of the proper court that a third person has possession or control of property in which the judgment debtor has an interest or is indebted to the judgment debtor in an amount exceeding two hundred fifty dollars.” Here, Judgment Creditor filed an Affidavit for Order for Appearance and Examination that does not furnish any evidence to show Mr. Kaho personally possesses property belonging to the Judgment Debtors or that Mr. Kaho is personally indebted to the Judgment Debtors in an amount exceeding $250. The Affidavit is deficient.[2]

Accordingly, the Motion for Protective Order is GRANTED. The Third-Party Examination of Hiroshi Kaho scheduled for December 13, 2023 is VACATED. The request to quash the subpoena issued to Mr. Kaho is GRANTED.

Kerry Bensinger

Judge of the Superior Court

[1] Mr. Kaho also advances the following arguments: (1) Ajinomoto has offered to provide a sworn declaration to confirm that Ajinomoto Foods has assumed the obligations of the Judgment Debtors; (2) section 708.300 permits a judgment creditor to obtain documents in post-judgment proceedings from a judgment debtor, not a third party; and (3) Mr. Kaho has no obligation to appear for the examination because Judgment Creditor has not provided proof that it satisfied section 708.120, subdivision (f). Given the Court’s disposition of the Motion on the grounds there is no money judgment at issue, the Court need not address Mr. Kaho’s remaining arguments.

[2] The Court also notes that it is unclear whether Judgment Creditor seeks to examine Mr. Kaho in his individual capacity or representative capacity. If the Judgment Creditor is seeking the examination of a representative of Ajinomoto Foods, then the civil subpoena is erroneously directed to Mr. Kaho individually. The Application for Order is also similarly unclear as it is directed to Mr. Kaho as a third party.