Judge Martha K. Gooding, Case 2021-01148047 2022-09-19 Tentative Ruling

Judge: Martha K. Gooding, Case: 2021-01148047, Date: 2022-09-19 Tentative Ruling

Motion for Summary Judgment or, in the Alternative, Summary Adjudication

Defendant/Cross-Complainant Karma Automotive, LLC (“Karma”) and Defendant Liang Zhou (“Zhou”) (collectively, “Defendants”) seek summary judgment as to the entirety of the Complaint filed by Plaintiff VLF Automotive, LLC (“Plaintiff”). In the alternative, Defendants request summary adjudication of 15 issues.

On 6/22/2022, the Court continued the hearing on Defendant’s motion for summary judgment or, in the alternative, summary adjudication, pursuant to Plaintiff’s request. (6/22/2022 Minute Order.) The Court allowed the parties to submit opposition and reply papers to replace, not supplement, the previously filed opposition and reply. No additional papers were filed.

Objections

The Court notes Plaintiff did not comply with CRC Rule 3.1354(b) and (c). Nevertheless, the Court exercises its discretion to consider Plaintiff’s objections. Plaintiff’s objections are overruled.

Defendants’ objection numbers 1-3, 4-12, and 19-22 are overruled. Defendants’ objection numbers 13-18 are sustained.

Applicable Law

The standard governing motions for summary judgment and summary adjudication is settled. “[F]rom commencement to conclusion, the party moving for summary judgment bears the burden of persuasion that there is no triable issue of material fact and that he is entitled to judgment as a matter of law.” (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850.) A “party moving for summary judgment bears an initial burden of production to make a prima facie showing of the nonexistence of any triable issue of material fact. . . .” (Ibid.) “A prima facie showing is one that is sufficient to support the position of the party in question.” (Id. at p. 851.)

In both summary judgment and summary adjudication proceedings, the pleadings determine the scope of the relevant issues. (Port Medical Wellness, Inc. v. Connecticut General Life Ins. Co. (2018) 24 Cal.App.5th 153, 169.)

“A court identifies the issues framed by the pleadings, determines whether the moving party’s showing has established facts which negate the opponent’s claim and justify a judgment in the moving party’s favor, and if the summary judgment motion is meritorious on its face, the court will look to whether the opposition demonstrates there are triable, material factual issues.” (Clark v. Baxter Healthcare Corp. (2000) 83 Cal.App.4th 1048, 1054.) The opposing party must show by reference to specific facts the existence of a triable issue as to that cause of action. (Aguilar v. Atlantic Richfield Co., supra, 25 Cal.4th at p. 850.)

A cause of action cannot be established if the undisputed facts presented by the defendant prove the contrary of the plaintiff’s allegations as a matter of law. (Brantley v. Pisaro (1996) 42 Cal.App.4th 1591, 1597.) Alternatively, a moving defendant can show that a cause of action cannot be established by submitting evidence, such as discovery admissions and responses, that plaintiff does not have – and cannot reasonably obtain – evidence to establish an essential element of his cause of action. (Aguilar v. Atlantic Richfield Co., supra, 25 Cal.4th at pp. 854-855; Union Bank v. Superior Court (1995) 31 Cal.App.4th 573, 590 [finding moving defendant may show plaintiff's lack of evidence by factually devoid discovery responses after plaintiff has had adequate opportunity for discovery]; see Sheiding v. Dinwiddie Constr. Co. (1999) 69 Cal.App.4th 64, 80-81 [finding Union Bank rule only applies where discovery requests are broad enough to elicit all such information].)

Once a defendant meets its prima facie showing, the burden shifts to the plaintiff to show by reference to specific facts the existence of a triable issue as to that affirmative defense or cause of action. (Aguilar v. Atlantic Richfield Co., supra, 25 Cal.4th at p. 850.) To meet this burden, the plaintiff must present substantial and admissible evidence creating a triable issue. (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 163.) Theoretical, imaginative, or speculative submissions are insufficient to stave off summary judgment. (Doe v. Salesian Society (2008) 159 Cal.App.4th 474, 481; Bushling v. Fremont Med. Center (2004) 117 Cal.App.4th 493, 510.)

A summary adjudication motion “proceed[s] in all procedural respects as a motion for summary judgment.” (Code Civ. Proc., § 437c, subd. (f)(2).) To be successful, a summary adjudication motion must completely dispose of the entire cause of action, defense, damages claim, or duty to which the motion is directed. (Code Civ. Proc., § 437c, subd. (f)(1).)

Analysis

Issue 1: Each of VLF’s causes of action fail because VLF cannot establish a causal connection between Karma and Dr. Zhou’s alleged conduct and VLF’s alleged harm

Plaintiff’s Complaint alleges a breach of contract action against Karma and the following four causes of action against Defendants: fraudulent concealment; interference with prospective economic advantage; violation of Business and Professions Code section 17200; and misappropriation of trade secrets.

All five causes of action require Plaintiff to show causation. (San Mateo Union High School Dist. v. County of San Mateo (2013) 213 Cal.App.4th 418, 440 [“Under a contract theory plaintiffs must establish that defendants’ breach of its obligation proximately caused harm.]; Boschma v. Home Loan Center, Inc. (2011) 198 Cal.App.4th 230, 248 [The elements for a cause of action for deceit by concealment are: (1) the defendant must have concealed or suppressed a material fact, (2) the defendant must have been under a duty to disclose the fact to the plaintiff, (3) the defendant must have intentionally concealed or suppressed the fact with the intent to defraud the plaintiff, (4) the plaintiff must have been unaware of the fact and would not have acted as he did if he had known of the concealed or suppressed fact, and (5) as a result of the concealment or suppression of the fact, the plaintiff must have sustained damage.]; Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1153 [The elements of a cause of action for intentional interference with prospective economic advantage are: (1) an economic relationship between the plaintiff and some third party, with a reasonable probability of future economic benefit or advantage to the plaintiff; (2) the defendant’s knowledge of the relationship; (3) intentional acts on the part of the defendant designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm to the plaintiff proximately caused by the acts of the defendant.]; Bus. & Prof. Code, § 17204 [A UCL claim may be brought “by a person who has suffered injury in fact and has lost money or property as a result of the unfair competition.”]; Hall v. Time Inc. (2008) 158 Cal.App.4th 847, 855 [To establish standing to bring a UCL claim, a plaintiff must show causation to satisfy Business and Professions Code section 17204.]; Sargent Fletcher, Inc. v. Able Corp. (2003) 110 Cal.App.4th 1658, 1665 [“Under the 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.].)

Defendants met their initial burden to show there is no causal connection between Defendants’ conduct and Plaintiff’s alleged damages. (Defendants’ Material Fact [“DMF”] No. 2-11, and 14-19.)

However, Plaintiff met their shifted burden of showing a triable issue of material fact as to whether Plaintiff incurred $5 million dollars before or after entering into the NDA with Karma. (DMF No. 9 and 11; Defendants’ Appendix, Exhibit 2, 306:2-307:23.) The inclusion of a fact in the separate statement “effectively concedes the materiality of whatever facts are included. Thus, if a triable issue is raised as to any of the facts in your separate statement, the motion must be denied!” (Insalaco v. Hope Lutheran Church of West Contra Costa County (2020) 49 Cal.App.5th 506, 521, citing Nazir v. United Airlines, Inc. (2009) 178 Cal.App.4th 243, 252 and Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2009) [¶] 10:95.1, p. 10–35.).)

Accordingly, the motion for summary adjudication as to this issue is denied.

Issue 2: VLF’s first cause of action for breach of contract fails because there is no evidence that Karma breached the NDA

“[T]he elements of a cause of action for breach of contract are (1) the existence of the contract, (2) plaintiff's performance or excuse for nonperformance, (3) defendant's breach, and (4) the resulting damages to the plaintiff.” (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.)

Plaintiff’s first cause of action alleges Karma breached the NDA when it: “i) contacted AM General without VLF’s written consent; ii) used VLF’s confidential information to develop an independent Humvee program; and iii) refused to include VLF in its business plans to manufacture, market and distribute the Humvee project.” (Complaint, ¶ 44.)

Defendants met their initial burden to show Karma did not breach the NDA. (DMF No. 20-54.)

Plaintiff met Plaintiff’s shifted burden to raise a triable issue of material fact as to whether Defendants reached out to AM General to discuss a specific project that would be covered under the NDA. (Defendant’s Appendix, Exhibit 2, 207:18-208:19 and 209:15-21.)

Plaintiff also raised a triable issue as to whether Plaintiff’s alleged confidential information needed to be designated as such to receive protection under the NDA and whether Defendants receipt of the information is or should be considered confidential given the nature of the information or the circumstances of disclosure. (Id., Exhibit 1, Section 2; Exhibit 2, 186:1-187:12.)

Accordingly, the motion for summary adjudication as to this issue is denied.

Issue 3: VLF’s first cause of action for breach of contract fails because there is no evidence that Karma caused VLF to suffer any cognizable injuries.

Defendants met their initial burden to show there is no evidence that Karma caused VLF to suffer any cognizable injuries. (DMF No. 62-76 and 78.)

However, Plaintiff met its shifted burden of showing a triable issue of material fact as to whether Plaintiff incurred $5 million dollars before or after entering into the NDA with Karma. (See, Insalaco v. Hope Lutheran Church of West Contra Costa County (2020) 49 Cal.App.5th 506, 521, citing Nazir v. United Airlines, Inc. (2009) 178 Cal.App.4th 243, 252 and Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2009) [¶] 10:95.1, p. 10–35; Defendants’ Appendix, Exhibit 2, 306:2-307:23.)

Accordingly, the motion for summary adjudication as to this issue is denied.

Issue 4: VLF’s second cause of action for fraudulent concealment fails because there is no evidence that Karma and Dr. Zhou intended to defraud VLF

The elements of a cause of action for deceit by concealment are: (1) the defendant must have concealed or suppressed a material fact, (2) the defendant must have been under a duty to disclose the fact to the plaintiff, (3) the defendant must have intentionally concealed or suppressed the fact with the intent to defraud the plaintiff, (4) the plaintiff must have been unaware of the fact and would not have acted as he did if he had known of the concealed or suppressed fact, and (5) as a result of the concealment or suppression of the fact, the plaintiff must have sustained damage. (Boschma v. Home Loan Center, Inc. (2011) 198 Cal.App.4th 230, 248.)

CCP section 437c(e) provides that “summary judgment may be denied in the discretion of the court if . . . a material fact is an individual’s statement of mind, or lack thereof and that fact is sought to be established solely by the individual’s affirmation thereof.”

The Court exercises its discretion here and denies summary adjudication on this issue.

Issue 5: VLF’s second cause of action for fraudulent concealment fails because there is no evidence that VLF suffered any damages as a result of Karma and Dr. Zhou’s alleged actions

Defendants met their initial burden to show Plaintiff did not suffer any damages as a result of Defendants’ alleged actions. (DMF No. 93-95, 102-106.)

Accordingly, the motion for summary adjudication as to this issue is denied.

Issue 6: VLF’s third cause of action for intentional interference with prospection economic advantage fails because there is no evidence that Karma and Dr. Zhou caused an actual disruption of economic relations between VLF and AMG

The elements of a cause of action for intentional interference with prospective economic advantage are: (1) an economic relationship between the plaintiff and some third party, with a reasonable probability of future economic benefit or advantage to the plaintiff; (2) the defendant’s knowledge of the relationship; (3) intentional acts on the part of the defendant designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm to the plaintiff proximately caused by the acts of the defendant. (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1153.)

Defendants met their initial burden to show there was no disruption of Plaintiff’s relationship with AM General. (DMF No. 107-111 and 116-123.)

Plaintiff did not raise a triable issue of material fact as to whether there was any interference of Plaintiff’s relationship with AM General. Accordingly, the motion for summary adjudication as to this issue is granted.

Issue 7: VLF’s third cause of action for intentional interference with prospective economic advantage fails because there is no evidence that Dr. Zhou and Karma’s alleged actions were intentional or substantially certain to disrupt the economic relationship between VLF and AMG

In light of the Court’s ruling on Issue 6 above, this issue is moot.

Issue 8: VLF’s third cause of action for intentional interference with prospective economic advantage fails because there is no evidence that Dr. Zhou and Karma’s conduct was independently wrongful

In light of the Court’s ruling on Issue 6 above, this issue is moot.

Issue 9: VLF’s fourth cause of action for violation of the California Unfair Competition Law (“UCL”) fails because the evidence shows the only requested remedy is moot

The prayer in Plaintiff’s complaint seeks a temporary and permanent injunction. (Complaint, 19:16-18.) However, Plaintiff’s complaint also alleges that as a result of Karma’s unlawful, unfair, and fraudulent business practices, Plaintiff “suffered economic injury, including lost profits and investments, and thus has standing to sue under the UCL entitling it to all available remedies. (Id., ¶ 75.)

“A UCL action is equitable in nature; damages cannot be recovered…We have stated that under the UCL, ‘[p]revailing plaintiffs are generally limited to injunctive relief and restitution.’” (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1144.) An order for restitution “is one ‘compelling a UCL defendant to return money obtained through an unfair business practice to those persons in interest from whom the property was taken, that is, to persons who had an ownership interest in the property or those claiming through that person.’ (Kraus, supra, 23 Cal.4th at pp. 126–127, 96 Cal.Rptr.2d 485, 999 P.2d 718.) The object of restitution is to restore the status quo by returning to the plaintiff funds in which he or she has an ownership interest.” (Id., at 1149.)

Defendants did not meet their initial burden to show Plaintiff’s requested remedy is moot. (Complaint, ¶ 75.) Accordingly, the motion for summary adjudication as to this issue is denied.

Issue 10: VLF’s fourth cause of action for violation of the California Unfair Competition Law fails because there is no evidence that Karma and Dr. Zhou acted “wrongfully,” “unfairly,” or “fraudulently”

Business & Professions Code section 17200 prohibits “any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising.” Under the unlawful prong, a violation of law may be actionable as unfair competition under Business & Professions Code section 17200. (Lueras v. BAC Home Loans Servicing, LP, 221 Cal.App.4th 49, 81.)

“An unfair business practice occurs when that practice offends an established public policy or when the practice is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers…An unfair business practice also means the public policy which is a predicate to the action must be tethered to specific constitutional, statutory or regulatory provisions.” (Id. [internal citations omitted].) A fraudulent practice “require[s] only a showing that members of the public are likely to be deceived and can be shown even without allegations of actual deception, reasonable reliance and damage.” (Id. [internal citations omitted].)

Plaintiff’s complaint alleges as follows:

69. Defendant Karma and Dr. Lance Zhou engaged in conduct that was “unlawful” when they breached the parties’ NDA, engaged in conduct that intentionally interfered with VLF’s prospective economic advantage, and stole VLF’s confidential trade secrets.

70. Defendant Karma and Dr. Lance Zhou engaged in conduct that was “unfair” when they intentionally strung VLF along for the purpose of pumping the company for confidential trade secret information, while having no intent to actually consummate a deal with the company.

71. Defendant Karma and Dr. Lance Zhou engaged in conduct that was “fraudulent” when they intentionally concealed their plan to build an electric vehicle on its own, secretly contacted AMG for that purpose, and extracted confidential information from VLF with no intention to partner with VLF.

(Complaint, ¶¶ 69-71.)

Defendants did not meet their initial burden to show that Plaintiff cannot show Defendants engaged in unlawful, unfair, or fraudulent business practices. (Code Civ. Proc., § 437c, subd. (f)(1).)

Even if Defendants met their initial burden, Plaintiff met its shifted burden to raise a triable issue of material fact as to whether confidential information needed to be so designated to receive protection under the NDA and whether Defendants’ information is or should be considered confidential given the nature of the information or the circumstances of disclosure. (Id., Exhibit 1, Section 2; Exhibit 2, 186:1-187:12; DMF No. 191.)

Accordingly, the motion for summary adjudication as to this issue is denied.

Issue 11: VLF’s fifth cause of action for misappropriation of trade secrets fails because the evidence shows that VLF has not identified is purported trade secrets with reasonable particularity

“In any action alleging the misappropriation of a trade secret under the Uniform Trade Secrets Act (Title 5 (commencing with Section 3426) of Part 1 of Division 4 of the Civil Code), before commencing discovery relating to the trade secret, the party alleging the misappropriation shall identify the trade secret with reasonable particularity subject to any orders that may be appropriate under Section 3426.5 of the Civil Code.” (Code Civ. Proc., § 2019.210.)

A trial court may summarily rule on a trade secret misappropriation claim when the party claiming a trade secret fails to identify the trade secret with reasonable particularity as section 2019.10 requires. (Coast Hematology-Oncology Associates Medical Group, Inc. v. Long Beach Memorial Medical Center (2020) 58 Cal.App.5th 748, 756.)

Section 2019.210 “lays down when and how this is to happen” – the alleged trade secrets must be identified before commencing discovery and must be identified with reasonable particularity. (Coast Hematology-Oncology Associates Medical Group, Inc. v. Long Beach Memorial Medical Center, 58 Cal.App.5th at 758.) “This statute merely formalizes a generally necessary step in trade secret litigation.” (Id.) “The penalty for failing to make this disclosure is loss of trade secret protection.” (Id., at 756.)

Defendants met their initial burden to show Plaintiff did not make an affirmative disclosure or identify its purported trade secrets in accordance with Code of Civil Procedure section 2019.210. (DMF No. 253.)

Although Plaintiff showed that it discussed what Plaintiff believed were trade secrets during Plaintiff’s PMQ deposition, Plaintiff did not raise a triable issue of material fact as to whether Plaintiff complied with section 2019.210 (i.e. identify the trade secrets with reasonable particularity prior to commencing discovery). (Defendants’ Appendix, Exhibit 2, 121:3-134:8, 144:7-146:14, 150:21-151:22, 153:7-154:3.)

Accordingly, the motion for summary adjudication on this issue is granted.

Issue 12: VLF’s fifth cause of action for misappropriation of trade secrets fails because there is no evidence that Dr. Zhou caused Karma to misappropriate any purported trade secrets

Based on the Court’s ruling above on Issue 11, this issue is moot.

Issue 13: Karma and Dr. Zhou are entitled to summary adjudication of VLF’s request for punitive damages on its fraudulent concealment claim because there is no “clear and convincing” evidence of fraudulent, oppressive, or malicious conduct”

A claim for punitive damages can properly be the subject of a motion for summary adjudication. (Catalano v. Superior Court (2000) 82 Cal.App.4th 91, 92; see Code Civ. Proc., § 437c, subd. (f)(1).) Summary adjudication may only be granted, however, when an entire claim for punitive damages is eliminated. (Id., Catalano, 82 Cal.App.4th at 92; see Code Civ. Proc., § 437c, subd. (f)(1).)

Pursuant to Civil Code section 3294(b), an employer “shall not be liable for damages pursuant to subdivision (a), based upon acts of an employee of the employer, unless the employer had advance knowledge of the unfitness of the employee and employed him or her with a conscious disregard of the rights or safety of others or authorized or ratified the wrongful conduct for which the damages are awarded or was personally guilty of oppression, fraud, or malice. With respect to a corporate employer, the advance knowledge and conscious disregard, authorization, ratification or act of oppression, fraud, or malice must be on the part of an officer, director, or managing agent of the corporation.”

Malice “means conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.” (Civ. Code, § 3294, subd. (c)(1).)

Oppression “means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person’s rights.” (Civ. Code, § 3294, subd. (c)(2).)

Fraud “means an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.” (Civ. Code, § 3294, subd. (c)(3).)

A moving party meets its burden by submitting a separate statement that separately identifies the punitive damages claim, each supporting material fact claimed to be without dispute with respect to that claim, and the evidence in support of each undisputed fact with an appropriate citation to the record is sufficient. (Basich v. Allstate Ins. Co. (2001) 87 Cal.App.4th 1112, 1118.)

In determining whether to allow a plaintiff to proceed with a claim for punitive damages, the Court must assess the plaintiff’s evidence with reference to the clear-and-convincing evidentiary burden. (Basich, 87 Cal.App.4th at 1119.)

Summary adjudication on a punitive damages claims is properly granted when plaintiff fails to present clear and convincing evidence of tortious conduct that was malicious, fraudulent or in blatant violation of law or policy. (Food Pro Internat., Inc. v. Farmers Ins. Exchange (2008) 169 Cal.App.4th 976, 995; see Pacific Gas and Electric Company v. Superior Court (2018) 24 Cal.App.5th 1150, 1170 [Punitive damages are appropriate if the defendant’s acts are reprehensible, fraudulent or in blatant violation of law or policy.].)

As noted above, Defendant’s request for summary adjudication on Plaintiff’s second cause of action, for fraudulent concealment, is denied. Accordingly, summary adjudication on this issue is also denied.

Issue 14: Karma and Dr. Zhou are entitled to summary adjudication of VLF’s request for punitive damages on its intentional interference with prospective economic advantage claim because there is no “clear and convincing” evidence of fraudulent, oppressive, or malicious conduct”

In light of the Court’s ruling on Issue 6 above, this issue is moot.

Issue 15: Karma and Dr. Zhou are entitled to summary adjudication of VLF’s request for punitive damages on [sic] misappropriation of trade secrets claim because there is no “clear and convincing” evidence of fraudulent, oppressive, or malicious conduct”

In light of the Court’s ruling on Issue 11 above, this issue is moot.

For the foregoing reasons, Defendants’ motion for summary judgment is denied.

Defendants shall give notice.