Judge Walter P. Schwarm, Case 30-2020-01175549 2022-08-16 Tentative Ruling

Judge: Walter P. Schwarm, Case: 30-2020-01175549, Date: 2022-08-16 Tentative Ruling

Moving Party’s (Dean Chang) Motion to Compel Lucille Chang to Identify Trade Secrets with Reasonable Particularity Pursuant to CCP 2019.210 and Seeking a Protective Order Against Service and Enforcement of Discovery by Lucille Chang Related to Trade Secrets (Motion), filed on 3-22-22 under ROA No. 432, is DENIED.

Code of Civil Procedure section 2019.210 states, “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.”

The Motion states, “Mrs. Chang has not yet identified with sufficient particularity the alleged trade secrets misappropriated by either Dean Chang, Joseph Chang and/or TCT pursuant to CCP 2019.210 to allow for the commencement of discovery. No CCP 2023.210 disclosure was ever served in this matter and the only facts provided are the vague facts set forth in quoted above from the COMPLAINT, particularly the contentions in paragraph 18. These are vague, woefully inadequate descriptions. (Motion; 8:9-14; Emphasis and italics in Motion.)

Responding Party’s (Lucille Chang) Complaint, filed on 2-1-21 under ROA No. 2, alleges the following causes of action: (1) Removal of Director; (2) Appointment of Provisional Director; (3) Breach of Fiduciary Duty; and (4) Accounting.

The Complaint contains the following allegations: (1) “As a result of Dean Chang’s duties with TCT, and while in a position of responsibility, trust and confidence, Dean Chang became intimately familiar with the whole of TCT’s product designs, operations and was granted access to, and gained knowledge of, numerous trade secrets and confidential and proprietary information (“Confidential Information”) that are the property of TCT including, without limitation, the following: [¶] a. The identities of and detailed information related to TCT’s customers, [¶] b. Details as to the types and volume of products sold to TCT’s customers, [¶] c. TCT’s costs and supply chain, [¶] d. TCT’s strategies, pricing and plans related to goods sold to TCT’s customers, [¶] e. Knowledge of customer preferences for changes in TCT’s products, and [¶] f. TCT’s marketing plans related to promotion, offerings, and future offerings of products to new and existing customers.” (Complaint, ¶ 18.); (2) “The Confidential Information was developed over a substantial period of time, required substantial money and effort to compile, is unavailable to the public or to others in the industry, and would be of immense value to TCT’s competitors. The Confidential Information has been the subject of TCT’s reasonable efforts to maintain its confidentiality, including restricting access to the Confidential Information to those employees of TCT who must use the Confidential Information in performing their jobs.” (Complaint, ¶ 19.); (3) “Dean Chang breached his duty of loyalty by engaging in self-interested behavior to deprive Mrs. Chang of her control, ownership, and participate in TCT, including: . . .[¶] b. Upon information and belief, providing Confidential Information (or access to Confidential Information) to Joseph Chang and Home Healthcare, to be used in competition with TCT.” (Complaint, ¶ 51(b); and (4) Joseph Chang breached his duty of loyalty by engaging in self-interested behavior to deprive Mrs. Chang of her control, ownership, and participate in TCT, including: . . . [¶] b. Upon information and belief, giving Confidential Information to Home Healthcare. . . . [¶] Upon information and belief, causing or allowing assets or sales to be diverted from TCT to Home Healthcare.” (Complaint, ¶ 52 (b) and (h).)

Responding Party’s Opposition to Defendant Dean Chang’s Motion to Compel Trade Secret Designation and for Protective Order (Opposition), filed on 8-2-22 under ROA No. 501, states, “The language of CCP section 2019.210 is clear. It relates to ‘any action alleging the misappropriation of a trade secret under the Uniform Trade Secrets Act.’ (emphasis added). Likewise, the language of CCP section 3426.5 is also clear. It applies to ‘an action under this title. . .’, i.e. the UTSA. Accordingly, these statutes are only applicable where a claim has been alleged under the UTSA.” (Opposition; 4:13-17.)

“A violation of the UTSA occurs when an individual misappropriates a former employer's protected trade secret client list, for example, by using the list to solicit clients [citation] or to otherwise attain an unfair competitive advantage [citation].” (Reeves v. Hanlon (2004) 33 Cal.4th 1140, 1155 (Reeves).) Advanced Modular Sputtering, Inc. v. Superior Court (2005) 132 Cal.App.4th 826, 830 (Advanced), explains, “We hold that Code of Civil Procedure section 2019.210 (formerly Code of Civil Procedure section 2019, subdivision (d)), which provides that discovery relating to a trade secret may not commence until the trade secret is identified with ‘reasonable particularity,’ is not limited in its application to a cause of action under the Uniform Trade Secrets Act (UTSA) (Civ.Code, §§ 3426–3426.11), for misappropriation of the trade secret, but extends to any cause of action which relates to the trade secret. We also hold that where the plaintiff makes a showing that is reasonable, i.e. fair, proper, just, rational, the trade secret has been described with “reasonable particularity,” and is sufficient to permit discovery to commence.” (Footnote 1 omitted.) “Section 20l9.210 is clear and requires little if any interpretation or construction. By its own express terms, section 2019.210 is not ‘cause of action’ specific. [Citation.] Rather, it refers to any ‘action,’ i.e. the entire lawsuit, ‘alleging misappropriation of a trade secret.’ (§ 2019.210.) While we can envision an “action” alleging misappropriation in some causes of action but not in others, the instant “action” is not one of them. [¶] A fair reading of this complaint and its 10 causes of action compels the conclusion that each and every cause of action hinges upon the factual allegation that AMS misappropriated Sputtered Films' trade secrets. For example, the complaint alleges that Mishin and Curran have breached their confidentiality agreements with Sputtered Films by disclosing the trade secrets to AMS. There is no other breach alleged. The other causes of action are similarly dependent on the misappropriation allegation. Under these circumstances, an order that bars discovery on the cause of action for misappropriation but permits it on the others simply makes no sense. Where, as here, every cause of action is factually dependent on the misappropriation allegation, discovery can commence only after the allegedly misappropriated trade secrets have been identified with reasonable particularity, as required by section 2019.210.” (Id, at pp. 834-835.)

Here, Plaintiff has alleged misappropriation of trade secrets as defined under the Uniform Trade Secrets Act (UTSA) in her third cause of action at paragraphs 51 and 52 of the Complaint. (See, Civ. Code, § 3426.1.) Therefore, Code of Civil Procedure section 2019.210 applies, at least as to discovery related to misappropriation of trade secrets under Plaintiff’s third cause of action. Also, Plaintiff has served written discovery involving the formation and operations of Defendant—Joseph Chang’s alleged competing company, Tuffcare, Inc., including Special Interrogatories (Set 1) Nos. 46-63. In Requests for Production (Set 1) Nos. 22 and 34-40, Plaintiff has also sought production of communications between Dean Chang and Joseph Chang related to TCT and documents regarding the formation and operations of Tuffcare, Inc. including transactions between TCT and Tuffcare. (Bonfa Decl., ¶ 3 and Exhibits 3 and 4.) Therefore, the court finds that Code of Civil Procedure section 2019.210 applies because the Complaint sufficiently pleads misappropriation of trade secrets as defined under the UTSAin her third cause of action.

Responding Party also contends that paragraph 18 of the Complaint “. . . is more than sufficient to comply with CCP section 2019.210 because it identifies the trade secrets with sufficient particularity to allow the trial court to control discovery, and for Defendants to conduct discovery . . . .” (Opposition; 6:14-16.)

Advanced states, “The purpose of section 2019.210 is as follows: ‘First, it promotes well-investigated claims and dissuades the filing of meritless trade secret complaints. Second, it prevents plaintiffs from using the discovery process as a means to obtain the defendant's trade secrets. [Citations.] Third, the rule assists the court in framing the appropriate scope of discovery and in determining whether plaintiff's discovery requests fall within that scope. [Citations.] Fourth, it enables defendants to form complete and well-reasoned defenses, ensuring that they need not wait until the eve of trial to effectively defend against charges of trade secret misappropriation. [Citations.]’ [Citation.]” (Advanced, supra, 132 Cal.App.4^th at pp. 833-834.)

“ ‘Reasonable particularity’ mandated by section 2019.210 does not mean that the party alleging misappropriation has to define every minute detail of its claimed trade secret at the outset of the litigation. Nor does it require a discovery referee or trial court to conduct a miniature trial on the merits of a misappropriation claim before discovery may commence. Rather, it means that the plaintiff must make some showing that is reasonable, i.e., fair, proper, just and rational[,] [citation], under all of the circumstances to identify its alleged trade secret in a manner that will allow the trial court to control the scope of subsequent discovery, protect all parties' proprietary information, and allow them a fair opportunity to prepare and present their best case or defense at a trial on the merits. [Citations.] [¶] The degree of ‘particularity’ that is ‘reasonable’ will differ, depending on the alleged trade secrets at issue in each case. Where, as here, the alleged trade secrets consist of incremental variations on, or advances in the state of the art in a highly specialized technical field, a more exacting level of particularity may be required to distinguish the alleged trade secrets from matters already known to persons skilled in that field. Nothing in section 2019.210 precludes the trial court from considering relevant evidence, including expert witness declarations, on the adequacy of a designation to describe the alleged trade secrets and distinguish them from prior art. But it remains true that, at this very preliminary stage of the litigation, the proponent of the alleged trade secret is not required, on pain of dismissal, to describe it with the greatest degree of particularity possible, or to reach such an exacting level of specificity that even its opponents are forced to agree the designation is adequate. We question whether any degree of specificity would satisfy that lofty standard. What is required is not absolute precision, but ‘reasonable particularity.’ ” (Id., at pp. 835-836.)

Paragraph 18 of the Complaint sufficiently meets the reasonable particularity requirement in light of the type of trade secrets alleged. Responding Party does not allege misappropriation of highly specialized technical secrets. Rather, Responding Party alleges misappropriation of TCT’s customer lists, logistical information, and sales strategies. The allegations at paragraph 18 are sufficiently specific to allow Defendants to prepare their defenses and tailor discovery. Responding Party’s discovery requests have not been directed at specific technical details of Defendants’ products or business operations. Defendants may seek further relief if Plaintiff seeks to discover specific information related to Defendants’ trade secrets.

The court finds that Responding Party’s Complaint satisfies the reasonable particularity requirement in Code of Civil Procedure section 2019.210. Therefore, the court DENIES Moving Party’s (Dean Chang) Motion to Compel Lucille Chang to Identify Trade Secrets with Reasonable Particularity Pursuant to CCP 2019.210 and Seeking a Protective Order Against Service and Enforcement of Discovery by Lucille Chang Related to Trade Secrets filed on 3-22-22 under ROA No. 432.

Responding Party is to give notice.