Judge: Nathan Vu, Case: 2019-01108310, Date: 2022-11-14 Tentative Ruling

Please Note: The hearing on this matter is scheduled for 8:30 A.M.

Motion for Attorney’s Fees

Defendant Abraham Pina’s motion for attorney’s fees is DENIED.

Defendant Abraham Pina’s request for judicial notice is DENIED. It is unnecessary to ask the court to take judicial notice of materials previously filed in this case. “[A]ll that is necessary is to call the court’s attention to such papers.” (Weil & Brown, Cal. Prac. Guide: Civil Proc. Before Trial (The Rutter Group 2022) ¶ 9.53.1a.)

Plaintiff Broker Solutions, Inc.’s evidentiary objections are MOOT as they were not material to the disposition of this motion.

Defendant Abraham Pina moves for an order awarding $540,460.47 in attorney’s fees and $53,725.32 in costs and expenses.

On a motion for attorney’s fees, the moving party has the burden of: (1) establishing entitlement to an award, and (2) documenting the appropriate hours expended and hourly rates. (ComputerXpress, Inc. v. Jackson (2001) 93 Cal.App.4th 993, 1020.) Attorney’s fees are recoverable as costs, when authorized by contract, statute, or law. (Code Civ. Proc., § 1033.5, subd. (10)(A)-(C).)

Defendant Pina contends he is entitled to recover statutory fees pursuant to the California Uniform Trade Secrets Act (CUTSA). CUTSA provides that if “a claim of misappropriation is made in bad faith . . . the court may award reasonable attorney’s fees and costs [including expert fees] to the prevailing party.” (Civ. Code, § 3426.4.) CUTSA “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; see Gemini Aluminum Corp. v. California Custom Shapes, Inc. (2002) 95 Cal.App.4th 1249, 1261.) “Because the award is a sanction, a trial court has broad discretion in awarding fees.” (FLIR Systems v. Parrish, supra, 174 Cal.App.4th at p. 1275.)

Application of Civil Code section 3426.4 “naturally raises three questions: Is the defendant the prevailing party? Was the claim made in bad faith? And what is a reasonable fee?” (Cypress Semiconductor Corp. v. Maxim Integrated Prods., Inc. (2015) 236 Cal.App.4th 243, 253.)

Prevailing Party

A defendant voluntarily dismissed from an action may be a prevailing party entitled to recover fees under CUTSA and Plaintiff does not appear to be disputing this point. (See, e.g., SASCO v. Rosendin Electric, Inc. (2012) 207 Cal.App.4th 837.)

Bad Faith

“Although the Legislature has not defined ‘bad faith,’ courts have developed a two-prong standard: (1) objective speciousness of the claim, and (2) [plaintiff’s] subjective bad faith in bringing or maintaining the action, i.e., for an improper purpose.” (FLIR Systems v. Parrish, supra, 174 Cal.App.4th at p. 1275; see also Gemini Aluminum Corp. v. California Custom Shapes, Inc., supra, 95 Cal.App.4th at p. 1262.)

“‘Objective speciousness exists where the action superficially appears to have merit but there is a complete lack of evidence to support the claim.’” (SASCO v. Rosendin Electric, Inc. (2012) 207 Cal.App.4th 837, 845.) The court may find a claim to be objectively specious, even where the case is dismissed prior to trial and prior to the completion of discovery. (Ibid.) Whether, objectively speaking, it appeared to the plaintiff at the time of filing that some evidence would be obtained in discovery to support a misappropriation claim is irrelevant to the court’s analysis. (Id. at pp. 847-848.)

Subjective bad faith means the action was commenced or continued for an improper purpose, such as harassment, unnecessary delay, or to thwart competition. (FLIR Systems v. Parrish, supra, 174 Cal.App.4th at p. 1278; see also SASCO v. Rosendin Electric, Inc., supra, 207 Cal.App.4th at p. 847; Gemini Aluminum Corp. v. California Custom Shapes, Inc., supra, 95 Cal.App.4th at pp. 1264-1264.) Because there will rarely be direct proof of bad faith, the court may infer a plaintiff’s state of mind from circumstantial evidence. (Gemini Aluminum Corp. v. California Custom Shapes, Inc., supra, 95 Cal.App.4th at p. 1263.) Bad faith “may be inferred where the specific shortcomings of the case are identified by opposing counsel, and the decision is made to go forward despite the inability to respond to the arguments raised.” (Id. at p. 1264.) An absence of evidence alone, however, is insufficient to support a finding of subjective bad faith. (SASCO v. Rosendin Electric, Inc., supra, 207 Cal.App.4th at p. 847.)

Objective Speciousness

Defendant Pina argues Plaintiff’s claims are objectively specious because Plaintiff’s trade secret designation identifies categories of information not protected by CUTSA. Plaintiff responds that some of the designated information — including lists of borrowers and potential borrowers — are protectable trade secrets.

CUTSA defines a trade secret as “information, including a formula, pattern, compilation, program, device, method, technique, or process, that: (1) Derives 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.” (Civil Code, § 3426.1, subd. (d).)

Customer lists may, in certain circumstances, satisfy the definition of a trade secret. (See, e.g., Courtesy Temporary Service, Inc. v. Camacho (1990) 222 Cal.App.3d 1278, 1287 [reversing trial court’s denial of injunction based on trial court’s finding that plaintiff’s customer list was “not any secret”].) “A list of customers or subscribers ‘built up by ingenuity, time, labor and expense of the owner over a period of many years is property of the employer,’ and ‘ [k]nowledge of such a list, acquired by an employee by reason of his employment, may not be used by the employee as his own property or to his employer’s prejudice.’” (Id. at p. 1287, citing Greenly v. Cooper (1978) 77 Cal.App.3d 382, 392.) The court concluded that the employees who had “sav[ed] themselves comparable efforts in screening those entities who declined [plaintiff’s] patronage, ha[d] acquired commercially invaluable information.” (Ibid.)

Defendant Pina contends the customer lists are not protected under CUTSA because the individuals who borrow money for home mortgages are matters of public record, as deeds of trust are recorded in the County Recorder’s office. Plaintiff points out, however, that one cannot simply search for Plaintiff’s loans through on-line resources to obtain a list of all past, current, or potential borrowers. Combing through public records to gather that evidence would take some amount of time and effort.

Plaintiff submits evidence showing that prior to his resignation, Defendant Pina sent to his personal email account various spreadsheets and other information, including client lists containing the names and contact information of existing and past customers of Plaintiff, as well as individuals who were interested in or in the process of borrowing from Plaintiff. (Bunce Decl., ¶ 20.) Plaintiff also submits evidence showing Plaintiff compiled and developed the customer lists over time and undertook reasonable efforts to keep its trade secret information confidential. (Bunce Decl., ¶¶ 15-16.) Therefore, Defendant Plaintiff fails to show that Plaintiff’s CUTSA claim is objectively specious.

Subjective Bad Faith

Defendant Pina argues that Plaintiff’s subjective bad faith can be inferred from four separate aspects of this action: (1) Plaintiff’s meritless trade secrets designation; (2) Plaintiff’s discovery responses that failed to identify any alleged acts of misappropriation by Defendant Pina; (3) the fact Plaintiff sued Defendant Pina on all the same causes of action as the other defendants and ultimately dismissed these other causes of action against Defendant Pina; and (4) Plaintiff’s engaging in ad terrorem litigation tactics by accusing a raft of former employees.

Defendant Pina’s argument conflates the objective speciousness and bad faith elements. Absence of evidence alone does not support a finding of bad faith. Furthermore, the fact that Plaintiff brought several causes of action against Pina and multiple other defendants does not support a finding of subjective bad faith. Prior to filing the action, Plaintiff discovered that all former employee-defendants in this action, including Defendant Pina, had emailed various information to their personal email accounts. (Bunce Decl., ¶ 20.) Defendant submits no other evidence supporting a finding of subjective bad faith in Plaintiff’s decision to pursue or continue this action.

Plaintiff shall give notice of this ruling.