AAA Blueprint & Digital v. Ibarra

Filed 10/24/07 AAA Blueprint & Digital v. Ibarra CA4/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

Appeal from a judgment of the Superior Court of Orange County, William M. Monroe, Judge. Affirmed.

Wang, Hartmann & Gibbs, PC, Richard F. Cauley, Peter O. Huang and Jessica M. Helliwell for Defendants and Appellants.

Silverstein & Huston, Steven A. Silverstein, Mark W. Huston and Robert I. Cohen for Plaintiff and Respondent.

* * *

Plaintiff AAA Blueprint & Digital Reprographics, Inc., sued defendants Jimmy Ibarra and Alliance Reprographics (Alliance) for misappropriation of trade secrets and other causes of action. The court found plaintiffs price list for preferred customers was a trade secret which defendants misappropriated. On appeal defendants challenge the courts factual findings that (1) plaintiff took reasonable steps to preserve the secrecy of the pricing list and (2) the pricing data was not generally known . . . or reasonably ascertainable in the industry. We disagree with defendants contentions and affirm the judgment.

FACTS

Plaintiffs complaint alleged it is in the business of providing large format copying, and blueprint and digital reprographics services to its clients, such as architects and engineers. Plaintiff maintained a confidential preferred price list for certain repeat customers based on factors such as the type and amount of services they ordered. The list contained specialized and unique prices for each client, described the clients needs, preferences, [and] practices, and was developed over time through the hard work of [p]laintiffs employees. Plaintiff employed Ibarra for about a year until Ibarra left on short notice to work for Alliance, plaintiffs competitor. At Alliance, Ibarra solicited plaintiffs customers, luring them with offers of better pricing that beat [p]laintiffs preferred pricing for those customers. As a result, plaintiff suffered a dramatic decrease in its expected repeat business and significant monetary losses.

At a bench trial, the testifying witnesses included Doreen Valadez, vice-president and production manager for plaintiff, and Ibarra. Valadez testified the price list was confidential, available only to employees with billing duties, and accessible solely in two ways: (1) on a password-protected computer and (2) by viewing a single hard copy of the list kept beneath a computer monitor stand in a cubby hole under the work orders. Valadez, as Ibarras supervisor, informed him the information was confidential and not to be shared with anyone.

Witnesses testified Ibarra left plaintiffs employ under the following circumstances: On a Tuesday morning Ibarra told Valadez he was quitting that same day to work for his nephew selling products like pens over the internet. Besides Valadez, Ibarra also assured plaintiffs owner that he (Ibarra) planned to work for his nephew, not plaintiffs competitor. It was decided that Ibarra would stay two more days to do some billing. Ibarra asked Valadez for permission to print a second price list so he could take it into the other room and bill; while the list was printing, Valadez admonished Ibarra to be sure to shred the document when he was done. On Thursday night, Ibarra, weighing [his] options, visited Alliances facility, and on Saturday he was hired as Alliances operations manager. (A client of plaintiff testified Ibarra told her a few days before he left plaintiffs employ that he was going into the business with someone else.) Immediately after joining Alliance, Ibarra contacted some of plaintiffs clients, solicited their business, and offered them competitive pricing. Ibarra testified he determined what prices to offer these clients based on a gut feeling or a hunch.

In a lengthy statement of decision, the court articulated its findings that plaintiffs preferred price list derived economic value from not being generally known and was a subject of reasonable efforts by plaintiff to maintain its secrecy, and was therefore a trade secret under Civil Code section 3426.1.[1] The court further found that defendants misappropriated the list. The court awarded plaintiff compensatory damages of $60,000 for lost profits and exemplary damages of $120,000 as a total award for all causes of action.

DISCUSSION

Defendants contend the court abused its discretion when it determined that [plaintiff] took reasonable steps to preserve the secrecy of its client list and the list was not generally known in the trade. Before turning to the merits of this contention, we first discuss defendants failure to adequately research and brief the proper standard of review and to cite in their opening brief all evidence supporting the judgment.

The Substantial Evidence Standard of Review Applies Here

Defendants contend the trial court made discretionary findings . . . subject to an abuse of discretion standard of review. Plaintiff counters the appropriate standard is the substantial evidence rule, which applies when findings of fact are challenged. (Bickel v. City of Piedmont (1997) 16 Cal.4th 1040, 1053 (Bickel), superseded by statute on another point as recognized in Eller Media Co. v. City of Los Angeles (2001) 87 Cal.App.4th 1217, 1220, fn. 3.)

Defendants assert that regardless of whether the substantial evidence or abuse of discretion standard is applied, the result is the same, and therefore plaintiffs disputing the proper standard of review is an attempt[] to raise form over substance. Contrary to defendants cavalier assertion, the standard of review to be applied is critical to this courts determination of the issues on appeal: [T]he standard of review is the compass that guides the appellate court to its decision. It defines and limits the course the court follows in arriving at its destination. Deviations from the path, whether it be one most or least traveled, leave writer and reader lost in the wilderness. (People v. Jackson (2005) 128 Cal.App.4th 1009, 1018, fn. omitted.)

The abuse of discretion standard of review applies where a trial judge has, either by express statute or by rule of policy, a discretionary power to decide the issue. (9 Witkin, Cal. Procedure (4th ed. 1997) Appeal, 356, p. 404.) Here, defendants make no effort to even identify a discretionary ruling or action that would trigger the abuse of discretion standard. Rather, each contention they raise on appeal disputes factual findings made by the trial court. (Morlife, Inc. v. Perry (1997)56 Cal.App.4th 1514, 1521 [trial courts finding customer list was a trade secret was subject to substantial evidence standard of review].) We therefore review the courts findings for substantial evidentiary support. Where findings of fact are challenged on a civil appeal, we are bound by the elementary, but often overlooked principle of law, that . . . the power of an appellate court begins and ends with a determination as to whether there is any substantial evidence, contradicted or uncontradicted, to support the findings below. [Citation.] We must therefore view the evidence in the light most favorable to the prevailing party, giving it the benefit of every reasonable inference and resolving all conflicts in its favor in accordance with the standard of review so long adhered to by this court. (Bickel, supra, 16 Cal.4th at p. 1053.)

Although Defendants Failed to Cite All Evidence Supporting the Judgment, We Will Nonetheless Consider Their Claims

Plaintiff urges us to treat defendants appeal as waived because defendants in their opening brief failed to cite all the material evidence on all significant issues. Defendants counter they did reference some evidence supporting the judgment, such as plaintiffs contention it took steps to protect the secrecy of its client list by 1) keeping a copy of the client list on a secured computer requiring password for entry . . . ; and 2) verbally informing its employees that the client list was confidential . . . . Defendants further argue plaintiff fails to show it suffered any unfair prejudice from the truncated statement of facts and that defendants are not responsible for guessing what [plaintiff] might possibly consider to be material evidence on point.

Defendants cursory two-paragraph statement of the case and the facts in their opening brief failed to meet the effort required of a party who challenges factual findings: It is incumbent upon the appellant to state fully, with transcript references, the evidence which is claimed to be insufficient to support the findings. The reports are replete with statements to the effect that the courts are not called upon to make an independent search of the record where the rule is ignored. [Courts may] disregard claims of insufficiency of the evidence even though that be the only ground of appeal, where the appellant has failed to make a satisfactory statement in the opening brief, or a supplement thereto, of the evidence claimed to be insufficient, with transcript references. (Goldring v. Goldring (1949) 94 Cal.App.2d 643, 645 (Goldring).) As Goldring makes abundantly clear, the issue here is not whether plaintiff was prejudiced by defendants failure to adequately summarize the relevant evidence, but rather whether a reviewing court is obliged to independently comb the record where an appellant fails to provide adequate briefing. The well-established answer is that a reviewing court bears no duty to consider a challenge to the sufficiency of the evidence where the appellant fails to brief the court on all relevant evidence. Nonetheless, we will exercise our discretion to proceed in this case to consider defendants claims.

Under the Uniform Trade Secrets Act, a Trade Secret Must Be the Subject of Reasonable Efforts to Maintain Its Secrecy and Cannot Be Generally Known to Persons Who Can Obtain Economic Value From Its Disclosure or Use

The Uniform Trade Secrets Act (the Act) makes clear that the right of free competition does not include the right to use confidential work product of others. (Morlife, Inc. v. Perry, supra, 56 Cal.App.4th at p. 1520, italics added.) Under the Act, a complainant may recover damages for the actual loss caused by misappropriation, as well as exemplary damages for willful and malicious misappropriation . . . . ( 3426.3, subds. (a) & (c).) Misappropriation involves the improper acquisition, disclosure or use of a trade secret. ( 3426.1, subd. (d).)[2] Trade secret means information . . . 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. ( 3426.1, subds. (d)(1) & (d)(2).)

In order to prevail, plaintiff was required to affirmatively show the existence of both elements of the foregoing definition of a trade secret. (American Paper & Packaging Products, Inc. v. Kirgan (1986) 183 Cal.App.3d 1318, 1324 (American Paper).) Defendants contend plaintiffs showing failed to satisfy either prong. We address each prong separately, viewing the evidence in the light most favorable to the prevailing party and examining whether any substantial evidence supports the trial courts finding the price list was trade secret (Morlife, Inc. v. Perry, supra, 56 Cal.App.4th at p. 1521).

Substantial Evidence Supports the Trial Courts Finding Plaintiff Took Reasonable Steps to Preserve the Price Lists Secrecy

Defendants contend plaintiff failed to adequately protect its client list when it: 1) failed to have its employees sign confidentiality or non-disclosure agreements; 2) failed to properly mark the client list as confidential; 3) failed to keep the price list in a safe place; and 4) failed to prevent others from viewing such trade secrets.

Defendants assertion that plaintiff failed to keep the price list in a safe place is meritless. The court found to the contrary based on substantial evidence that a single copy of the price list was kept beneath work orders in a cubbyhole or in a locked drawer to which only employees with billing duties were granted access.

Defendants allegation that plaintiff failed to prevent others from viewing the list is both meritless and misleading, presenting yet another example of defendants unabashed failure to fully and fairly summarize the evidence. Defendants assert two of plaintiffs employees who worked as drivers had access to the list. But in fact, one driver set up [a] new billing station and the other took over Ibarras billing duties after [Ibarra] left, so that both employees needed to see the price list in order to conduct billing work (and were not simply drivers). Defendants try to excuse these omissions by arguing their opening brief referenced relevant reporters transcript pages so the Court had a reasonable opportunity to review the material facts. In fact, defendants referenced those pages to support their contention that drivers had access to the price list. For defendants to now argue these page references enabled this court to review the surrounding text to ferret out further testimony that the drivers in fact had billing-related duties, shows a disrespect and lack of forthrightness we find troubling.

Equally meritless is defendants contention that plaintiffs failure to label the price list as confidential or to require its employees to sign confidentiality agreements prevents the list from being trade secret. Written confidentiality agreements and labels are not absolute requirements under trade secret law. Instead such agreements and labels are factors which a court may consider in deciding whether a proprietor reasonably tried to maintain secrecy. Other relevant factors include whether an employer advis[ed] employees of the existence of a trade secret, limit[ed] access to a trade secret on need to know basis (Courtesy Temporary Service, Inc. v. Camacho (1990) 222 Cal.App.3d 1278, 1288), and restrict[ed] access [to] and physical[ly] segregate[ed] the information (In re Providian Credit Card Cases (2002) 96 Cal.App.4th 292, 304). Efforts at maintaining secrecy need not be extreme, just reasonable under the circumstances. (Religious Technology Center v. Netcom On-Line Communication Services, Inc. (1995) 923 F.Supp. 1231, 1254.) The facts should show the proprietor intended its customer information to remain secret and undertook steps to secure that end. (Morlife, Inc. v. Perry, supra, 56 Cal.App.4th at p. 1523.) Here the court found, based on substantial evidence, that plaintiff advised its employees the list was confidential,[3] limited the lists availability only to billing employees, and insulated the list on a password-protected computer and in a cubbyhole under papers or in a locked drawer. The court noted plaintiff is a small company employing less than 10 individuals and therefore would not be expected to have an employee agreement or handbook.

In sum, substantial evidence supported the courts finding plaintiff took reasonable steps to preserve the secrecy of its price list.

Substantial Evidence Supports the Courts Finding the Pricing Information Was Not Generally Known in the Trade or Readily Ascertainable.

Defendants contend plaintiffs preferred price list was not a protectible trade secret because the pricing data was generally known in the trade and/or readily ascertainable, and the compilation process [was] neither sophisticated nor difficult nor particularly time consuming. As to their assertion the pricing data was generally known in the trade, defendants provide no support in their briefs for this proposition; we therefore disregard it. As to their contention the pricing information was readily ascertainable, defendants rely on the following testimony by Ibarra for evidentiary support: Q. And of those customers, given your relationship, if you were to ask them what theyre paying for reprographic services, would they generally give that information to you? [] . . . [] A. The witness: Yes, they would. They would actually offer me, and a lot of times, theyd say price . . . doesnt matter.

The court expressly disbelieved Ibarras testimony and found to be speculative the defendants contention that plaintiffs preferred customers would have freely divulged any pricing information if asked. The court stated: The defendants repeatedly contend that the information could have been easily established . . . simply by asking the customers themselves. However, both defendant Ibarra and Vazquez [Alliances owner] testified that they came up with this . . . unique pricing list for each customer . . . using . . . gut feel . . . and by virtue of many years of experience in the business. Neither testified that they asked any customer about pricing, but speculated that the information may be available, if asked. . . .  I just found it difficult to accept Mr. Ibarras testimony.

Defendants further argue Ibarra, upon starting to work for plaintiff, brought with him many clients with whom he had long-standing relationships. But the court noted Ibarra did not put on evidence that he brought any clients with him to [plaintiff] entitling him to take those clients with him [to Alliance]. The court further found that once Ibarra moved to Alliance, although he may have known some of these [customers], he got to them . . . by using that price list . . . .

Defendants reliance on American Paper, supra, 183 Cal.App.3d 1318 is misplaced. There, a custom packaging material company sought to enjoin two former salespersons from using or disclosing its list of customers who bought shipping supplies and containers from the company. (Id. at pp. 1320, 1322.) Thus, the alleged trade secret in American Paper was a customer list, not a pricing list. (Id. at p. 1321.) In addition, in American Paper substantial evidence showed the salespersons compiled the lists from their own efforts and did not receive the lists from the company. (Id. at p. 1325.) Substantial evidence also showed that the methods utilized to formulate and update such lists . . . included visiting communities in [the salespersons] sales area and going into the areas zoned for industry in these communities[,] locat[ing] what appeared to be manufacturing companies and mak[ing] a list of these companies[, and] then mak[ing] cold calls, described as an unscheduled visit to the company, in an attempt to talk to a representative and hopefully establish a buy/sell relationship. (Id. at p. 1321.) The Court of Appeal in American Paper pointed out: While the information sought to be protected here, that is lists of customers who operate manufacturing concerns and who need shipping supplies to ship their products to market, may not be generally known to the public, they certainly would be known or readily ascertainable to other persons in the shipping business. The compilation process in this case is neither sophisticated nor difficult nor particularly time consuming. (Id. at p. 1326.)

Here, substantial evidence showed plaintiffs list was not simply a list of identities and locations of customers which could be compiled easily by making cold calls on potential clients, but was instead a list of preferred prices given to repeat customers. The trial court found the list derive[d] an independent economic value by providing [plaintiff] with a substantial business advantage and allowed defendants to forego sometimes lengthy, . . . expensive, [or] other extraordinary efforts, including advertising [and] promotional campaigns, to develop their own customer list.

In sum, substantial evidence supports the courts finding plaintiffs pricing information was not generally known to the public or to others who could derive an economic benefit from it.

DISPOSITION

The judgment is affirmed. Plaintiff shall recover its costs on appeal.

IKOLA, J.

WE CONCUR:

SILLS, P. J.

ARONSON, J.

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[1] All statutory references are to the Civil Code.

[2] The definition of misappropriation includes [a]cquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means ( 3426.1 subd. (b)(1)) or [d]isclosure or use of a trade secret of another without express or implied consent by a person who: [] (A) Used improper means to acquire knowledge of the trade secret; or [] (B) At the time of disclosure or use, knew or had reason to know that his or her knowledge of the trade secret was: [] (i) Derived from or through a person who had utilized improper means to acquire it; [] (ii) Acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or [] (iii) Derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use. ( 3426.1, subds. (b)(2)(A) & (B).)

[3] Although Ibarra testified Valadez never informed him of the lists confidentiality, Valadez testified to the contrary. The court expressly found Valadez to be more credible than Ibarra.