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Timestamp: 2019-04-23 20:53:53+00:00

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Morrison & Foerster, Robert D. Raven, Gary M. Rinck, Andrew E. Monach and Peter L. Shaw for Plaintiff and Appellant.
Does the statutory privilege for statements made in judicial proceedings (Civ. Code, § 47, subd. 2) preclude liability for an otherwise wrongful disclosure of trade secrets? Plaintiff ITT Telecom Products Corporation (ITT) filed the instant suit for damages alleging its former employee, defendant Gerald F. Dooley, had violated contractual and other duties of confidentiality. Dooley moved for summary judgment or summary adjudication based on the privilege, asserting his disclosures were made as a consultant to a party involved in litigation with ITT. The trial court granted Dooley's motion for summary judgment, and ITT has appealed.
As explained below, we will reverse, holding the privilege does not apply to the voluntary disclosure of trade secrets in violation of a contract of confidentiality.
ITT alleged that after July 1982 and before September 1983 Dooley disclosed confidential information and trade secrets as a paid consultant to [214 Cal.App.3d 312] Intercontinental De Communicaciones Por Satelite, S. A., a Panamanian corporation (Intercomsa). The disclosures were concurrent with ITT's October 1982 demand for arbitration with Intercomsa and Intercomsa's April 1983 lawsuit against ITT concerning an allegedly defective telephone switching system purchased from ITT, a Delaware corporation.
In 1967 in Ohio, Dooley signed an "employee's agreement to assign inventions" with ITT's predecessor which provided in pertinent part: "I further agree that I will not, except as required in the conduct of the Company's business or as authorized in writing on behalf of the Company, publish or disclose, during such term of employment or subsequent thereto, any secret or confidential knowledge concerning any invention or other matter relating to the Company's business which I may in any way acquire by reason of my employment by the Company."
In December 1977, ITT retained Dooley after acquiring the assets, including contract rights, of Dooley's former employer. Dooley left ITT's employ in July 1982.
After Intercomsa became dissatisfied with an international telephone switching system it had purchased from ITT, in October 1982 ITT demanded arbitration in New York. Intercomsa contacted a telecommunications consulting firm to assist its arbitration defense.
In October 1982, the consulting firm hired Dooley for $600 to $800 per day as an expert consultant. Dooley traveled to Panama for a week in November 1982 to consult with Intercomsa. Intercomsa wanted to know whether the switching system conformed to ITT's product descriptions and specifications and the contract between Intercomsa and ITT. Dooley answered 11 of Intercomsa's questions by a written report dated November 19, 1982. Dooley also instructed Intercomsa on traffic engineering of telephone calls based on his general education, his work experience with ITT [214 Cal.App.3d 313] and previous employers, and his knowledge of particular product developments by ITT.
Dooley supplied Intercomsa with other information about the system which he obtained from another former employee of ITT who wished to remain anonymous. Dooley could not recall if his informant was still employed by ITT when he obtained this information.
Dooley discussed his report with Intercomsa's attorneys in Washington, D.C., in December 1982 or January 1983.
Dooley provided Intercomsa with information for the purpose of assisting it in litigation with ITT. In April 1983, Intercomsa filed a complaint against ITT in a Florida federal district court. On February 1, 1984, the district court granted Intercomsa's motion precluding ITT from deposing Dooley or obtaining his report because he was not a designated trial witness, although he was designated an expert consultant. fn. 4 This action was filed on February 28, 1984. The following day, ITT filed an ex parte motion to expedite Dooley's deposition and production of his report.
6. Were the statements made in a judicial proceeding?
 ITT's contentions are based on Bradley, supra, 30 Cal.App.3d 818, where "[t]he court interpreted existing California precedent and the Restatement categories as sketching the outermost boundaries for application of the privilege (id., at pp. 824-825), and concluded: '[A]bsolute privilege in judicial proceedings is afforded only if the following conditions have been met: the publication (1) was made in a judicial proceeding; (2) had some connection or logical relation to the action; (3) was made to achieve the objects of the litigation; and (4) involved litigants or other participants authorized by law.' (Id., at p. 825.) The third condition was further refined by the court, which underlined 'the requirement that [the publication] be made in furtherance of the litigation and to promote the interest of justice.' (Id., at p. 826.)" (Wilburn, supra, 189 Cal.App.3d 764, 772-773, italics omitted.) We note that Bradley's elaboration on the third condition has been questioned (O'Neil v. Cunningham (1981) 118 Cal.App.3d 466, 475 [173 Cal.Rptr. 422]) and expressly rejected (McClatchy Newspapers, Inc., supra, 189 Cal.App.3d 961, 971).
[2b] ITT argues Dooley's statements were not made to promote justice or achieve the objects of the arbitration or the federal action. Instead, he made them solely for compensation. As Dooley responds, it is undisputed that his statements were made in order to assist ITT's adversary in litigation.
Wilburn summarized the law as follows. "The privileged status of a particular statement ... depends on its relationship to an actual or potential issue in an underlying action. Courts respect the absolute aspect of the privilege by considering a statement's apparent or ostensible connection to the underlying action, without exploring the writer's [or speaker's] actual, [214 Cal.App.3d 316] subjective intent or purpose." (189 Cal.App.3d 764, 776.) fn. 8 Dooley's statements fit the third condition of the privilege because they were made to assist in litigation.
Again invoking Bradley, supra, 30 Cal.App.3d 818, 826, ITT warns that to apply the privilege is to condone filing lawsuits for the sole purpose of shielding related trade secret disclosures. Such allegations do not appear in ITT's complaint.
The application of the privilege should not depend on Intercomsa's later decision, relevant to discovery under federal civil procedure, whether to [214 Cal.App.3d 317] designate a consultant as an expert witness. A contrary conclusion would hinder judicial search for the truth. (Cf. Kahn, supra, 673 F.Supp. 210, 213.) We conclude that statements by Dooley as a consultant to assist a potential litigant qualify for the statutory privilege.
7. Does the privilege apply to statements violating a contract of confidentiality?
[5a] ITT contends the statutory privilege of Civil Code section 47, subdivision 2, does not apply to statements in breach of an express contract of confidentiality or nondisclosure.
The parties have not cited and we have not found any precedent considering application of the privilege for a witness's statements in judicial proceedings to the breach of an express nondisclosure agreement. (Compare Bond v. Pecaut (N.D.Ill. 1983) 561 F.Supp. 1037, 1041, affirmed 734 F.2d 18 -- common law witness privilege would apply to breach of implied confidentiality contract.) ITT again relies on Bradley in arguing the privilege should be narrowly confined to cases where its application is required by public policy and should not be extended without a "specific justification" for so doing. Without endorsing the restrictive view, we agree the privilege should not be automatically applied to new legal theories without consideration of the competing policies involved.
[5b] On the other hand, trade secrets have been recognized as a constitutionally protected intangible property interest. (Ruckelshaus v. Monsanto Co. (1984) 467 U.S. 986, 1001-1004 [81 L.Ed.2d 815, 831-833, 104 S.Ct. 2862].) Evidence Code section 1060 provides: "If he or his agent or employee [214 Cal.App.3d 319] claims the privilege, the owner of a trade secret has a privilege to refuse to disclose the secret, and to prevent another from disclosing it, if the allowance of the privilege will not tend to conceal fraud or otherwise work injustice."
Moreover, it is possible to waive even First Amendment free speech rights by contract. In In re Steinberg (1983) 148 Cal.App.3d 14, 20 [195 Cal.Rptr. 613], the court recognized that a moviemaker had a First Amendment right to disseminate his movie, but that this right was limited by his agreement to submit the final version of the movie to the juvenile court for editing. fn. 9 In Erie Telecommunications, Inc. v. City of Erie, Pa. (3d Cir. 1988) 853 F.2d 1084, 1094-1101, a cable television franchisee was held under federal law to have voluntarily, knowingly, and intelligently waived its First Amendment rights by an agreement with the franchisor.
Thus, we balance society's interest in accurate judicial proceedings against ITT's property interest in information yielding a competitive advantage and Dooley's written promise of nondisclosure.
Dooley relies on Willig v. Gold (1946) 75 Cal.App.2d 809 [171 P.2d 754], which observed that an agent is under no legal duty to refrain from disclosing his principal's dishonest acts to their victim. (Id. at p. 814.) Willig involved no assertion of privilege and its irrelevance is manifest.
Cutter is useful for both its dissimilarities and similarities. Notably, it did not involve an express agreement on nondisclosure or confidentiality. Instead, the psychotherapist was recognized to have a statutory duty to protect the patient's confidences. In contrast, Evidence Code section 1060 imposes no similar duty on an employee or other party to a trade secret to claim the owner's privilege against disclosure.
The protection afforded by Evidence Code section 1060 would be nugatory unless an employer is able to fill the gap in the statute by contractually requiring an employee to assert the employer's privilege against trade secret disclosure, as ITT essentially did here. By the express nondisclosure agreement, Dooley undertook an obligation similar to the psychotherapist's statutory duty.
Under the circumstances before us, we hold that Dooley was not privileged under Civil Code section 47, subdivision 2, to voluntarily breach an express confidentiality agreement.
8. Has Dooley disclosed any trade secrets?
 Dooley contends a separate ground for granting summary judgment is that ITT "has not identified any specific information, statement or report it considers a trade secret or confidential information that was disclosed by" Dooley.
In any event, as we observed in AARTS Productions, Inc. v. Crocker National Bank, supra, 179 Cal.App.3d 1061, a summary judgment motion "must stand self- sufficient and cannot succeed because the opposition is weak. [Citations.] A party cannot succeed without disproving even those claims on which the opponent would have the burden of proof at trial. [Citations.] " (Id. at pp. 1064-1065.) Dooley's separate statement of undisputed facts did not require ITT to prove its case at this stage of the proceedings.
9. Does the privilege apply to a tort claim of misappropriation of trade secrets?
 Tort and contract law have been contrasted as follows. "As Professor Prosser has explained: '[Whereas] [c]ontract actions are created to protect the interest in having promises performed,' '[t]ort actions are created to protect the interest in freedom from various kinds of harm. The duties of conduct which give rise to them are imposed by law, and are based primarily upon social policy, and not necessarily upon the will or intention of the parties ....' (Prosser[, supra,] p. 613.)" (Tameny v. Atlantic Richfield Co. (1980) 27 Cal.3d 167, 176 [164 Cal.Rptr. 839, 610 P.2d 1330, 9 A.L.R.4th 314].) "The law imposes the obligation that 'every person is bound without contract to abstain from injuring the person or property of another, or infringing upon any of his rights.' (Sec. 1708, Civ. Code.) This duty is independent of the contract and attaches over and above the terms of the contract. ... 'It may be granted that an omission to perform a contract obligation is never a tort, unless that omission is also an omission of a legal duty. But such legal duty ... may spring from extraneous circumstances not constituting elements of the contract as such, although connected with and dependent upon it and born of that wider range of legal duty which is due from every man to his fellow, to respect his rights of property and person, and refrain from invading them by force or fraud.'" (Jones v. Kelly (1929) 208 Cal. 251, 255 [280 P. 942].) "'The common thread woven into all torts is the idea of unreasonable interference with the interests of others.'" (Smith v. Superior Court (1984) 151 Cal.App.3d 491, 496 [198 Cal.Rptr. 829], quoting Prosser, supra, at p. 6, italics omitted.) Tort law may be viewed as attempting to define the terms of the unwritten social contract that binds members of a society together.
We also derive guidance from cases considering whether an alleged invasion of privacy was privileged. The personal secrets of individuals are comparable to the trade secrets of businesses. We have already discussed in part 7 above both Ribas v. Clark, supra, 38 Cal.3d 355, where the witnesses' privilege overcame both common law and statutory invasion of privacy claims, and Cutter v. Brownbridge, supra, 183 Cal.App.3d 836, where the privilege was limited by a constitutional invasion of privacy claim. We add that in Hagan v. Fairfield, supra, 238 Cal.App.2d 197, 201, the privilege defeated a common law invasion of privacy claim.
[8b] We consider ITT's interest in trade secrets to be closer to the common law privacy right in Ribas than the constitutional privacy right in Cutter. As already explained, unlike the psychotherapist in Cutter, Dooley had no statutory duty to assert ITT's trade secret privilege.
The trade secret protection desired by ITT is spelled out in the nondisclosure agreement with Dooley. We are unconvinced any similar obligation imposed by tort law should overcome the witnesses' privilege to voluntarily make statements in judicial proceedings. We hold the privilege applies to ITT's tort claim of unauthorized disclosure of trade secrets.
10. Did Dooley engage in unprivileged tortious conduct?
ITT contends that even if Dooley's disclosures to Intercomsa are privileged against a tort claim, he engaged in other conduct not similarly privileged.
ITT more specifically asserts Dooley "is liable not just because the information was disclosed, but because he breached the solemn trust of his former employer. [Fn. omitted.]" ITT does not advance its position by reiterating it in various ways. The breach of trust was the disclosure and vice versa.
ITT also asserts Dooley's "liability derives not just from the statements themselves, but from his actions in soliciting and receiving money for the sale of information that was not his to sell." ITT misunderstands the nature [214 Cal.App.3d 324] of its tort cause of action. Absent unauthorized disclosure of trade secrets, there is nothing wrongful about Dooley being paid for his expertise. ITT identifies no other tortious conduct by Dooley other than his privileged statements.
The summary judgment is reversed because the privilege is inapplicable to Dooley's voluntary disclosures allegedly violating his nondisclosure agreement. ITT to recover costs on appeal.
Cottle, J., and Elia, J., concurred.
­FN 2. ITT's other purported causes of action were: breach of an implied covenant of good faith and fair dealing in the written employment contract, unfair competition, violation of Labor Code section 2860, and injunctive relief.
­FN 3. We note no issue is made of the absence of the defense of privilege from Dooley's answer.
­FN 6. The cited cases involve only witnesses in judicial proceedings, though Civil Code section 47, subdivision 2, renders privileged statements made in "any (1) legislative or (2) judicial proceeding, or (3) in any other official proceeding authorized by law, or (4) in the initiation or course of any other proceeding authorized by law and reviewable pursuant to Chapter 2 (commencing with Section 1084) of Title 1 of Part 3 of the Code of Civil Procedure ...."
­FN 8. In Wilburn we applied the privilege liberally, implicitly rejecting Bradley's restrictive view. (189 Cal.App.3d 764, 776-778.) The authors of Bradley and Barbary Coast Furniture Co. disassociated themselves from Wilburn's conclusions in Silberg v. Anderson* (Cal.App.), also relied on by ITT. Presumably the California Supreme Court granted review of that case (on Oct. 27, 1988 (S007056)) to resolve this conflict in authority.
*Reporter's Note: For Supreme Court opinion, see Silberg v. Anderson (1990) 50 Cal.3d 205, reversing the judgment of the Court of Appeal.
­FN 10. We employ this terminology simply to distinguish the privilege of Civil Code section 47, subdivision 2, from the statutory trade secret privilege without retreating from our observations in part 6 above.
­FN 11. We observe this cause of action is not based on the Uniform Trade Secrets Act (Civ. Code, §§ 3426-3426.10) enacted effective January 1, 1985 (§ 3426.10), since Dooley's alleged misappropriation occurred before September 1983.

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