Source: https://app.ediscoveryassistant.com/case_law/15233-global-compliance-inc-v-am-labor-law-co
Timestamp: 2020-06-02 20:53:37
Document Index: 661229707

Matched Legal Cases: ['§ 21', '§ 17200', '§ 437', '§ 2019', '§ 437', '§ 3426', '§ 3426', '§ 3426', '§ 3426', '§ 3426', '§ 1008', '§ 2023', '§ 2016', '§ 22', '§ 2031', '§ 904', '§ 904']

GLOBAL COMPLIANCE, INC., Plaintiff and Respondent,
AMERICAN LABOR LAW COMPANY et al., Defendants and Appellants.
Global Compliance, Inc., Plaintiff and Appellant,
Mango Graphics Corporation et al., Defendants and Respondents.
American Labor Law Company, Defendant and Respondent.
Mango Graphics Corporation, Defendant and Respondent.
Nos. B171017, B172497, B173706, B174694.(Los Angeles County Super. Ct. No. GC029763).
APPEAL (B171017) from an order of the Superior Court of Los Angeles County, Edward Y. Kakita, Temporary Judge. (Pursuant to Cal. Const., art. VI, § 21.) Affirmed as to Defendant and Appellant American Labor Law Company; appeal of Defendant and Appellant Mango Graphics Corporation deemed to be a petition for a writ of mandate and denied.
APPEALS (B172497, B173706, B174697) from judgments and orders of the Superior Court of Los Angeles County, C. Edward Simpson, Judge. Reversed.
Law Offices of Ernest J. Francheschi, Jr., Ernest J. Francheschi, Jr.; Sedgwick, Detert, Moran & Arnold, Warren J. Krauss, Kirk C. Jenkins and James Yuanxin Li for Plaintiff and Respondent and Plaintiff and Appellant.
Gary Hollingsworth for Defendant and Appellant and Defendant and Respondent American Labor Law Company.
Lewis Brisbois Bisgaard & Smith, Roy G. Weatherup, Daniel DeCarlo and Deborah Sirias for Defendant and Appellant Mango Graphics Corporation and Defendants and Respondents Mango Graphics Corporation, Roberta Bremner, Danielle Blattner, Robert Blattner and Tina Tsai.
I. Matters Embraced by Consolidation of Four Appeals
*1 On this consolidated appeal, Global Compliance, Inc., doing business as Compliance Poster Company (hereafter CPC) challenges two summary judgments and the respective awards of attorney fees. American Labor Law Company (hereafter ALLC) and Mango Graphics Corporation (hereafter Mango) challenge the respective awards of monetary discovery sanctions against them. In B173706, CPC appeals from the summary judgment and the $62,721 attorney fee award order in favor of ALLC. In B172497, CPC appeals from the summary judgment in favor of Mango and four individuals, Tina Tsai, Barbara (known as Danielle) Blattner, Robert Blattner, and Roberta Bremner (collectively, the Mango defendants). In B174694, CPC appeals from the order awarding Mango $242,550 as attorney fees. In B171017, ALLC and Mango appeal from the discovery sanction order directing Mango and its attorneys, jointly and severally, and ALLC to pay attorney fees in the respective amounts of $6,300 and $3,000.[1]
CPC produced “all-on-one” posters which publish labor-related laws for sale to employers who are required by federal and state law to post notices of these laws in the workplace. ALLC was its competitor. Mango printed the labor law posters developed and designed by ALLC. Tsai was Mango's president and vice-president of ALLC. Danielle, a former CPC employee, was employed by Mango and then by ALLC when it was formed about January 2002. Bremner, also a former CPC employee, was employed by Mango. Robert, Danielle's husband, was a Mango consultant, and although never a CPC employee, he previously provided business advice to a CPC principal.
On appeal, CPC contends the trial court erred by sustaining ALLC's objections to the declarations of Patricia Blum and Jeanne Stout. It contends summary judgment was improper as to any defendant, because material issues of fact exist regarding whether CPC's research, development and marketing data and customer lists qualified as trade secrets or protectable proprietary interests and whether defendants misappropriated these trade secrets or interests. CPC also contends the awards of attorney fees must be vacated for that reason and because there was no bad faith showing and CPC was being punished for pursuing its dismissed federal claim.
Mango contends no discovery sanction was available because the underlying discovery order only applied to ALLC. Mango and ALLC argue no award was proper, because the original motion for sanctions was procedurally defective and CPC was not entitled “to a second bite at the apple under any legal theory.” They further contend the award was unsupported by the evidence in that they had complied by producing the paper “hard copies of all the requested documents” and they were not obligated to create electronic versions in a CD–ROM format.
We conclude reversal of the summary judgments is mandated. At a minimum, material issues of fact remain regarding whether: (1) CPC has protectable property interests in its research, development and marketing data and customer lists; (2) these interests qualified for trade secret protection; and (3) defendants misappropriated these interests. Reversal of these judgments also compels reversal of the attendant attorney fee awards. We uphold the discovery sanction orders, which are not erroneous or abuses of discretion.
A. Summary Judgment Background
*2 CPC originally sued ALLC, Mango, Tsai, Bremner, and the Blattners (collectively defendants) in federal court for violating the Racketeer Influenced Corrupt Organizations Act (RICO) and for various state law claims, including, misappropriation of trade secrets, conversion, unfair competition. That action was dismissed for lack of federal jurisdiction, because the requisite predicate acts for the RICO claim were not adequately pleaded. CPC then filed the present action on June 19, 2002.
In its complaint, CPC sued defendants for: (1) misappropriation of trade secrets; (2) conversion; (3) unfair competition (Bus. & Prof.Code, § 17200 et seq.); and (4) interference with prospective economic advantage. CPC sued Danielle and Bremner also for (5) breach of (written employment) contract and sued them and Robert for (6) breach of fiduciary duty not to divulge or disseminate CPC's trade secrets. Defendants filed a joint answer generally denying the complaint's allegations and asserting 22 affirmative defenses.
On December 31, 2002, CPC filed a motion for summary adjudication of issues on its causes of action for misappropriation of trade secrets, conversion, and unfair competition. On January 14, 2003, CPC also filed a motion for a preliminary injunction against defendants.
At the January 30, 2003 hearing, James Li, CPC's attorney, argued it was not possible for ALLC to have arrived at its entire product line for fifty states within less than five months from its start date of January 3, 2002, and an inference arose that ALLC instead copied CPC's work product in view of the similarities of “typos and things that do not exist on the states ['] version ... in 2002.” The trial court (Hon. J. Michael Byrne) denied CPC's motion for summary adjudication on the ground that material issues of fact existed. The court explained factual issues existed regarding whether defendants' posters were similar to CPC's and whether defendants' ability to produce their posters “within the time period so quickly [as] they've done” meant they cheated by copying CPC's posters. The court observed CPC's evidence offered to show defendants stole its property was circumstantial and that it was up to the trier of fact to make the “factual determination as to credibility of the evidence, credibility of the parties.”
Although finding CPC had “definitely shown suspicion—high suspiciousness” and it had “created definite suspicion in [its] mind as to what's going on,” the court denied its preliminary injunction motion.
On or about August 21, 2003, the Mango defendants filed a motion for summary judgment or, alternatively, for summary adjudication that the first through sixth causes of action were without merit. The Mango defendants asserted CPC could not, as a matter of law, show the existence of any trade secret, which was the factual linchpin for its first through fourth causes of action, namely, misappropriation of trade secrets; conversion; unfair competition; and tortious interference with prospective economic advantage. They argued that CPC's labor law posters were in the public domain in that they simply contained the required mandatory state and federal postings for the 50 states and were readily ascertainable by viewing CPC's Web site, and thus, CPC's posters did not contain any proprietary or confidential information which would constitute trade secrets.
*3 On September 5, 2003, CPC filed its opposition to the summary judgment or summary adjudication of issues motion. CPC countered that, contrary to the Mango defendants' claim, it had indeed precisely identified its trade secrets, which were described in paragraph 10 of its complaint as including “unique processes and methodologies for the development [and] design of [CPC]'s products; [and] research and development materials used to create [CPC]'s products” as well as its “confidential lists of customers and prospective customers.” And Michael Blum, the person CPC designated as most qualified, described CPC's trade secrets in detail during his deposition. CPC explained that key customers in the labor law poster market were not generally known and that its customer lists were not readily ascertainable from public sources and were the product of considerable efforts on CPC's part and contained pricing information. Similarly, CPC's marketing data, which included contact lists, constituted trade secrets, because they reveal not only the agencies where the postings were obtained but also the contact persons. By developing these contacts, CPC acquired the postings and sometimes advance notice of postings.
CPC protected its trade secrets through passwords which were necessary to access CPC's computer system. And employees, including Bremner and Danielle, were required to sign confidentiality agreements and were provided with notice that CPC's “business and internal affairs” were to remain confidential.
In their reply, the Mango defendants argued they did nothing wrong even if true CPC's premise that the commonality of the errors on CPC's and defendants' posters constituted evidence that defendants' posters were the product of CPC's research materials instead of their own independent research. As authority, they cited Feist v. Rural Tel. Service Co. (1991) 499 U.S. 340, 363 [copying of names from competitor's phone book not violative of copyright law], and TrafFix Devices, Inc. v. Marketing Displays, Inc. (2001) 532 U.S. 23, 29 [no “trade dress” (design or packaging) protection for “product features that are functional”]. In any event, the information on their posters was publicly available in that defendants could have obtained it from the Web sites of competitors, hard copies of competitors' posters, or anywhere else this information could be located.
On or about September 12, 2003, CPC filed a request for a continuance on the ground that essential discovery remained outstanding (Code Civ Proc., § 437c, subd. (h)). The request was denied, and after the hearing, the trial court took the Mango defendants' motion under submission.
On or about September 21, 2003, CPC filed a pleading in which it objected to ALLC's motion for joinder in the Mango defendants' summary judgment motion for lack of a separate statement of undisputed facts; renewed its request for a continuance; and offered supplemental opposition.
On September 26, 2003, the trial court denied CPC's continuance request and sustained the Mango defendants' objections to portions of Stout's and Blum's declarations. The court took judicial notice of CPC's earlier motion for summary adjudication of issues. It declined to consider, as untimely, the document submitted by CPC entitled “amended identification of trade secrets dated September 8, 2003,” filed September 16. The court denied summary judgment as to ALLC on a procedural ground.
*4 On the merits, the trial court (Hon. C. Edward Simpson) granted summary judgment in favor of the Mango defendants on the ground no triable issues of material fact existed. The court found CPC could not establish misappropriation of any trade secret, an essential component of its first four causes of action, namely, misappropriation of trade secrets, conversion, unfair competition, and interference with prospective economic advantage because CPC's posters were in the public domain, “readily available to the public on [CPC's] website, typically found in lunchrooms or other common areas at workplaces throughout the United States and consist of mandatory State and Federal labor law notices.” Also, although CPC claimed its posters in draft form are secret, “there [was] no evidence that any draft posters were misappropriated.” The judgment entered on October 31, 2003, recited that “[a]s a matter of law, the labor law posters at issue are not subject to trade secret protections.”
On or about October 14, 2003, ALLC filed its own motion for summary judgment or, alternatively, summary adjudication of issues.
ALLC essentially relied on the same grounds urged by the Mango defendants in their summary judgment motion as to the first through fourth causes of action. Additionally, ALLC argued that CPC's failure to comply with the requirement to identify the trade secrets with reasonable particularity before trade secret related discovery commenced (Code Civ. Proc., former § 2019, subd. (d)) was not cured by its tardy “Amended Identification of Trade Secrets” document served September 8, 2003, in response to defendants' motion to compel.
ALLC denied copying any of CPC's postings ALLC also asserted its culpability, if any, was derivative and judgment already had been granted to the individual defendants.
On November 18, 2003, CPC filed its opposition. CPC pointed out that the day before the hearing on the Mango defendants' motion, defendants produced 2,448 pages in response to three prior discovery orders, which included “key evidence” CPC relied on in its opposition to Mango's motion. CPC also relied on then available transcripts of the depositions of Danielle and ALLC employee Ernest Brambila taken in early September 2003.
CPC asserted ALLC presented evidence which was “in many instances, false or manufactured.” CPC argued that it had disclosed its trade secrets in paragraph 10 of the complaint, namely, “research and development materials used to create [CPC]'s products” and “confidential lists of customers and prospective customers” and further identified them in the deposition of Michael Blum. CPC also complied with the order of the discovery referee (Hon. Edward Y. Kakita, retired) for a separate list identifying the misappropriated trade secrets through its “Amended Identification of Misappropriated Trade Secrets” document.
CPC maintained that CPC's trade secrets were not “ ‘readily ascertainable [.]’ “ CPC's customer lists included “long-time customers that have purchased labor law posters since 1991,” and its lists were compiled and developed over years and consisted of names, addresses, contact persons and contained pricing information. CPC pointed out that “even if the customers' names could be found in telephone or trade directories, such public sources ‘ “would not disclose the persons who ultimately made up the list of plaintiff's customers.” ‘ [Citation.] It is the list of persons who actually purchase [plaintiff's] services that constitute confidential information.” (Courtesy Temporary Service, Inc. v. Camacho (1990) 222 Cal.App.3d 1278, 1288.)
*5 CPC further argued its “research and development materials used to create [CPC's] products,” including contact lists, were also trade secrets. The contact lists, which were on CPC's computer database, identified postings which were required and those merely recommended, the agencies where the postings could be obtained, and the agency contact person(s). CPC denied it was “claiming trade secret [protection] over the product design or selection of contact after it has been put onto the marketplace,” rather, “until the point it has been released, such information, along with the research materials used to create the product, are trade secrets.”
CPC listed the measures it took to protect its trade secrets. Passwords were needed to access its computer system, and confidential documents were shredded. Danielle, Bremner, and similar employees were required to sign confidentiality agreements and were notified that CPC's “ ‘business and internal affairs' were to be kept confidential.” CPC also described certain instances as demonstrating defendants misappropriated CPC's trade secrets.
CPC disputed ALLC's claim that it “ ‘found [its] own documentation and research’ “ and its denial “ ‘that it ever took or possessed anything from’ “ CPC. CPC argued it was not possible for ALLC to have completed its own entire product line in the time claimed.
In its reply, ALLC characterized CPC's aspersions as “distortion of the facts.” It pointed out that Judge Kakita had imposed evidentiary sanctions against both CPC and defendants. ALLC argued the claim of “false defense declarations” was based simply on CPC's disagreement with the individual defendants' statements. Also, ALLC's alleged “ ‘altering dates of research materials' “ was unsupported by the “ ‘postings' themselves.” ALLC explained that there were no telephone records of calls to Sacramento during December 2001 because ALLC was not formed until January 2002. And Danielle testified in her deposition that she did not need to call Sacramento because she “ ‘asked Robert to go to one of the [Los Angeles County Labor Department] offices close by and pick up a lot of’ “ the postings.
ALLC further argued that, contrary to CPC's claim, ALLC did not need to access CPC's “ ‘trade secret’ research files because CPC took ten years to create its product line and ALLC had a complete product line in a [matter] of months.” ALLC urged that it does not take 10 years to obtain the postings from state agencies, “scan postings into a computer graphics program, and then arrange the postings onto one large poster, which is printed and sold.”
ALLC disagreed that CPC produced evidence of misappropriation of any trade secret by ALLC. ALLC further argued there was no competent evidence that CPC's customer list was “anything more than an accretion of names with no distinction between profitable or unprofitable customers, or active or inactive accounts.” As for CPC's “research materials,” ALLC argued there was no evidence that ALLC or any individual defendant used the research materials in compiling ALLC's posters.
*6 On December 2, 2003, the trial court (Hon. C. Edward Simpson) sustained ALLC's objections to portions of the Stout and Blum declarations. At the conclusion of the hearing, the court granted ALLC's motion for summary judgment on the grounds that CPC “cannot establish its cause of action for misappropriation of trade secrets because it has no evidence that [ALLC] misappropriated anything that would constitute a trade secret. The material on the Labor Law posters themselves is not confidential or protected information. There is no evidence that [ALLC] used any customer list belonging to [CPC], or that it took customers away from [CPC].” The summary judgment was entered on January 9, 2004.
B. Summary Judgment Discussion
Before addressing the merits of whether or not the summary judgment motion of the Mango defendants or ALLC (or both) was improperly granted, we must first resolve CPC's claim that the trial court erred in sustaining certain objections to the declarations of Patricia Blum and Jeanne Stout offered by CPC in opposition to ALLC's summary judgment motion. As we shall discuss, the trial court erroneously sustained these objections.
1. Certain Objections Improperly Sustained
a. Objections to Patricia Blum Declaration
The trial court sustained ALLC's objections to paragraphs 2, 3, 5, 6, 8, 10, and 14 of Patricia Blum's declaration. In her first paragraph, Patricia states she was CPC's president. She stated in her second paragraph that “[b]y law, every employer in the country is required to post certain federal and state legal notices where they can be seen by employees. In 1991, my husband (Michael Blum) and I realized that there was a large potential market selling posters that combined all of the notices (also known as ‘postings') onto a single poster to make life easier for employers,” and, as stated in another paragraph, they formed a company which is now CPC. The court sustained ALLC's lack of foundation objection to her further statement that “CPC became the first company to develop these posters and eventually built a successful company selling these posters throughout the United States.” This objection should have been overruled in light of her preceding foundational statement in paragraph 1.
In paragraph 3, Patricia stated that “[t]o create these posters, CPC employed a staff of researchers to ensure that the posters were accurate and up to date.” The court sustained ALLC's lack of foundation objection to her remaining statements: “The comprehensive detailed source and contact information for the research materials have never been publicly available anywhere and comprised part of [CPC's] proprietary information. Further, there was (and still is) no current, accurate, and publicly-available list showing which postings are required, suggested, or merely voluntary. This compilation of data and research information comprises part of the proprietary information that ALLC misappropriated.” This objection also should have been overruled. A reasonable inference could be drawn that Patricia had personal knowledge about CPC's data and research information as CPC's president.
*7 The trial court sustained ALLC's lack of foundation, absence of supporting evidence, and legal conclusion objections to Patricia's statements in paragraph 5: “Posters may also contain non-mandatory elements and postings. Until the posters are released onto the marketplace, the precise posting selections, versions of the postings, design, and overall contents are trade secrets and confidential to CPC.” These objections also should have been overruled except as to the phrase “trade secrets.” As CPC's president, Patricia was entitled to state her lay opinion regarding whether CPC considered the unmarketed information to be confidential, and it would be reasonable to infer that Patricia had personal knowledge about whether posters might contain nonmandatory matters. We note no objection was sustained as to the identical language in paragraph 3 of her declaration in opposition to the Mango defendants' summary judgment motion.
Similarly, based on her capacity as CPC's president, Patricia was entitled to state how long it took CPC to create its posters and to give her lay opinion regarding whether ALLC would have been able to produce its line of posters within its claimed timeframe. In paragraph 6, she stated: “When CPC started in this business (which it did under a previous name), it took us at least five years of time and expense to create the initial 51 posters. Given the small number of people [ALCC] claims that it had working on its research, it would have been physically impossible for ALLC to have produced its federal poster and its posters for all 50 states in just the few months that it had. In that time, ALLC could not have (1) researched all of the postings under federal laws and the laws of all 50 states to determine which ones were legally required, (2) located and then contacted all of the federal and state agencies (and found the names of the appropriate contact person) where the postings might be obtained, (3) received all of the required postings from all of these bureaucratic agencies in a timely manner, and (4) then laid out and created the final poster products. Further, some of the required postings in certain states would have been out of print and not available from the agencies.” The trial court thus erred in sustaining ALLC's lack of foundation to the above statements and its absence of evidence objection to the statement that “it would have been physically impossible for ALLC to have produced its federal poster and its posters for all 50 states in just the few months that it had” and the remainder of the statement, which the trial court stated “consists of conclusions.” We note the trial court did not sustain any objection to the identical language in paragraph 4 of her declaration in opposition to the Mango defendants' motion.
In paragraph 8, Patricia stated: “CPC's contact lists identify not only the agencies from which postings are obtained but also the contact person to obtain such information. CPC has built up relationships with these contact people so that it is sometimes able to obtain advance information regarding postings that have not yet been released. Another trade secret document identified by CPC is its database keeping track of legislative changes for the federal and state labor laws. Again, the detailed data complied by CPC in these databases are not publicly available elsewhere and are the result of years of compilation and research. They are not readily ascertainable.” The trial court should have overruled ALLC's lack of foundation objection (“no evidence that this information is not readily ascertainable”) in view of Patricia's capacity as CPC's president. Except for the last sentence, this quoted language also appeared in her declaration in opposition to the Mango defendants' summary judgment motion, to which no objection was sustained.
*8 In paragraph 10, Patricia stated: “I have reviewed [Danielle's] declaration in which she claims that she ‘never solicited customers [she] knew to be customers of [CPC]. I have also never directed anyone to solicit such entities....' This is false.” ALLC made a lack of foundation objection, arguing there was no evidence Patricia had personal knowledge about whether or not Danielle directed anyone to solicit CPC's customers or that Danielle solicited any CPC customer. ALLC asserted in the absence of such evidence, her statement was simply conclusionary. This objection should have been overruled. The evidentiary basis for Patricia's statement was set forth in the following paragraphs, 11 and 12, to which ALLC made no objection. These paragraphs explained that Patricia observed Danielle and Ron Castro approach Phillip Zee of Accuform Signs, whom Danielle knew was “a major CPC client because she had been the account manager for this client when she worked at [CPC]” and that while Danielle stood back, Patricia saw “Castro go up and talk to Mr. Zee.” According to the declaration of Zee, Castro introduced himself to Zee as an ALLC representative and tried to solicit his business.
And the trial court should have overruled ALLC's lack of relevancy objection to Patricia's statements in paragraph 14: “I created a posting that combined language from an anti-discrimination form (with no indication as to its source) with the words ‘The American Policy is Our Policy. Anti–Discrimination Notice.’ There is no government posting that has this combination. I have reviewed ALLC's labor law posters and found this exact language on its posters. I understand that ALLC denied copying any of CPC's posters. Thus, I can only conclude that this unique posting, which I created, was misappropriated by ALLC from CPC's research materials.” (Emphasis omitted.) These statements were highly relevant on the issue of whether ALLC misappropriated CPC's research materials.
b. Objections to Jeanne Stout Declaration
The trial court sustained ALLC's objections to paragraphs 2, 3, 7, 8, 11, and 12. In paragraph 1, Stout identified herself as CPC's “National Account Manager.” In paragraph 2, she stated: “Before ... Danielle ... quit CPC, I saw her printing out customer lists. After she left, I looked for her Sales Training Manual at her desk and found that it was missing. CPC's Training Manual would have included [CPC]'s Checklists summarizing all of the postings required for each state. I also found [her] Rolodex, which contained CPC client data, was also missing.” The trial court should have overruled ALLC's lack of foundation objection. Stout was simply relating what she saw and to the extent she described the contents of the training manual and the Rolodex, a reasonable inference could be made that her knowledge flowed from her experience as CPC's National Account Manager. Her omission to mention the Rolodex during her deposition is not a fatal inconsistency but rather simply goes to the weight of her statement. We note that no objection was sustained to language substantially similar to the first two sentences quoted above in Stout's declaration in opposition to the Mango defendants' summary judgment motion.
*9 Similarly, the trial court should have overruled ALLC's lack of foundation objection to paragraph 3: “I saw ... Bremner downloading data from the computer system prior to her departure. Additionally, I saw [her] taking home confidential drafts of CPC's labor law posters. These drafts had not yet been put onto the market.” Stout was in a position to know whether the drafts were not yet released, and the remaining portions of her statements merely relate to her observations. Although innocent explanations for Bremner's conduct could be inferred from Stout's deposition testimony, this was a matter of the weight to be afforded to her statements not its admissibility. We note that no objection was sustained to the same quoted language in paragraph 3 of Stout's declaration in opposition to the Mango defendants' summary judgment motion.
In paragraph 7, Stout stated: “I was the account manager for Baja Fresh, a national restaurant chain and a major CPC customer. However, [Danielle] helped me on this account. At the time [Danielle] worked at CPC, Magueritte Kibel was the contact person at Baja Fresh for the purchase of labor law posters. However, in the Fall of 2001, Ms. Kibel changed positions and was no longer in charge of buying posters. Thus, there would have been no reason for [Danielle] to try to solicit Ms. Kibel in January 2002 to buy labor law posters unless [Danielle] had been using CPC information.” ALLC objected to the last statement for lack of foundation, because Stout did not provide any evidence Danielle tried to solicit Kibel or Baja Fresh or the source of information Danielle used to contact Baja Fresh. The court should have overruled ALLC's lack of foundation objection. As assistant manager of Baja Fresh, Stout would know who the contact person at Baja Fresh was. Also, her last statement was relevant to explain that when Danielle directed Ohringer in 2002 to send an ALLC solicitation mailer to Kibel, her belief that Kibel was the contact person was based on CPC's confidential customer list.
Stout stated in paragraph 8: “In the September 19, 2002, letter written by ... Danielle ... to the Monrovia police department, she listed Centrex Homes on ALLC's list of account files. The correct spelling is Centex Homes. Centex Homes was a CPC client during the time [Danielle] worked there. On CPC's customer lists, the name was also misspelled as Centrex Homes and was not corrected until after [Danielle] and ... Bremner left CPC.” ALLC objected to these statements on the ground of lack of foundation in that there was no evidence Centex Homes was a customer of CPC as contrasted with a “client” or that “Centex ever bought anything from CPC.” The trial court should have overruled this objection. Stout, as CPC's National Account Manager, was in a position to know whether Centex was misspelled as Centrex on CPC's customer lists, when the misspelling was corrected, and whether Centex was a paying customer.
*10 In paragraph 11, Stout described the similarities between the ALLC poster and the information in CPC's electronic research files for Michigan, Maine, California, and Louisiana. She stated that if ALLC had done its own research, it would have used the current version of the respective postings rather than the earlier versions in the CPC electronic research files on ALLC's Michigan, Maine and California posters. She stated ALLC's Louisiana poster and CPC's research files contained the same misspelled words “pay order” instead of the correct “payorder.” ALLC objected to Stout's statements for lack of foundation for the reasons that there was no evidence ALLC could have obtained the current versions of the postings and that the spelling of the phrase “pay order” as two words was erroneous and, if so, whether CPC or Louisiana made the error. These objections also should have been overruled. A reasonable inference could be drawn in view of Stout's capacity as CPC's National Account Manager that she would know whether the current versions would be available at the relevant time period. Whether CPC or Louisiana misspelled “payorder” as “pay order” does not pertain to a lack of foundation objection. We note that in her declarations in support of CPC's summary adjudication motion, Stout also described mistakes in ALLC's posters which tracked those in CPC's posters, of which the trial court took judicial notice in ruling on the Mango defendants' summary judgment motion.
ALLC made a lack of foundation objection (no evidence the names were CPC customers as contrasted to clients or that any of them ever bought anything from CPC) to paragraph 12: “I have reviewed the exhibits from Ernest Brambila's deposition.... I had previously researched these names and confirmed them as being CPC clients that had been contacted by ALLC.” This objection should have been overruled for the reason that whether the names represented paying customers or clients, which is a distinction without a difference here, did not implicate a lack of foundation objection.
2. Triable Issues of Fact Remain
Regarding the standard of review of a summary judgment motion, ALLC relies on Hunter v. Pacific Mechanical Corp. (1995) 37 Cal.App.4th 1282 for the proposition that “a defendant need not provide evidence to negate any element of Plaintiff's causes of action; it must merely point to Plaintiff's lack of evidence and support thereof.” But Hunter was expressly disapproved by our Supreme Court on this point in Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 854–855, footnote 23.
Aguilar announced this governing standard, to which we must adhere (Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 455): “[A]ll that the defendant need do is to show that the plaintiff cannot establish at least one element of the cause of action”; however, “[s]ummary judgment law in this state ... continues to require a defendant moving for summary judgment to present evidence, and not simply point out that the plaintiff does not possess, and cannot reasonably obtain, needed evidence.” (Aguilar v. Atlantic Richfield Co., supra, 25 Cal.4th at pp. 853–854, fn. omitted.) In other words, “the defendant must ‘support[ ]’ the ‘motion’ with evidence including ‘affidavits, declarations, admissions, answers to interrogatories, depositions, and matters of which judicial notice’ must or may ‘be taken.’ (Code Civ. Proc., § 437c, subd. (b).)” (Aguilar v. Atlantic Richfield Co., supra, 25 Cal.4th at p. 855.) Nonetheless, “[t]he defendant may also present evidence ... as through admissions by the plaintiff following extensive discovery to the effect that he has discovered nothing.” (Ibid., fn. omitted.)
*11 “[T]he court must consider all of the evidence and all of the inferences drawn therefrom” although “the court may not weigh the plaintiff's evidence or inferences against the defendants' as though it were sitting as the trier of fact. [I]f the court concludes that the plaintiff's evidence or inferences raise a triable issue of material fact, it must conclude its consideration and deny the defendants' motion.” (Aguilar v. Atlantic Richfield Co., supra, 25 Cal.4th at p. 856.) And “[c]ircumstantial evidence is just as good as direct evidence to create a triable issue of fact.” (Hussey–Head v. World Savings & Loan Assn. (2003) 111 Cal.App.4th 773, 780.)
“Since both summary judgment and summary adjudication motions involve purely questions of law, we review the granting of summary judgment or summary adjudication de novo to ascertain from the papers whether there is a triable issue of material fact [Citations.]” (Oakland Raiders v. National Football League (2005) 131 Cal.App.4th 621, 630.) “In performing our de novo review, we must view the evidence in a light favorable to plaintiff as the losing party [citation], liberally construing [plaintiff's] evidentiary submission while strictly scrutinizing defendant['s] own showing, and resolving any evidentiary doubts or ambiguities in plaintiff's favor. [Citations.]” (Saelzler v. Advanced Group 400 (2001) 25 Cal.4th 763, 768–769.)
Under the California Uniform Trade Secrets Act (UTSA), “ ‘[t]rade secret’ means 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.” (Civ.Code, § 3426.1, subd. (d)(1), (2).) “The test for trade secrets [thus] is whether the matter sought to be protected is information (1) which is valuable because it is unknown to others and (2) which the owner has attempted to keep secret. [Citation.]” (Whyte v. Schlage Lock Co. (2002) 101 Cal.App.4th 1443, 1454.) As a general matter, “[t]he issue of whether information constitutes a trade secret is a question of fact” (Thompson v. Impaxx, Inc. (2003) 113 Cal.App.4th 1425, 1430), and “[t]he ultimate determination of trade secret status is subject to proof presented at trial” (Whyte v. Schlage Lock Co., supra, 101 Cal.App.4th at p. 1453).
The information which may qualify for trade secret protection is varied. For instance, “[m]arketing research can be [a] trade secret if it ‘explores the needs of numerous, diverse buyers,’ but is not protectible if it ‘relates to a single prominent buyer that is presumably aware of its own needs....' [Citations.]” (Whyte v. Schlage Lock Co., supra, 101 Cal.App.4th at p. 1456; cf. Metro Traffic Control, Inc. v. Shadow Traffic Network (1994) 22 Cal.App.4th 853, 863–864 [customer preferences or requirements not trade secrets].) “[T]he results of confidential marketing research; advertising and marketing strategy, plans, and techniques ... would be valuable if known by a competitor because it would allow the competitor to predict and counter [the proprietor's] advertising and marketing.” (Whyte v. Schlage Lock Co., supra, 101 Cal.App.4th at p. 1456.) “Cases have recognized that information related to cost and pricing can be [a] trade secret. [Citations.]” (Id. at p. 1455.) Moreover, a trade secret includes a customer or client list. (See, e.g., Reeves v. Hanlon (2004) 33 Cal.4th 1140, 1155 [client list]; ABBA Rubber Co. v. Seaquist (1991) 235 Cal.App.3d 1, 18 [“A customer list is one of the types of information which can qualify as a trade secret”]’ Courtesy Temporary Service, Inc. v. Camacho, supra, 222 Cal.App.3d at p. 1287 [“The legislative intent and better reasoned cases, which the [UTSA] is meant to codify, establish that a customer list procured by substantial time, effort, and expense is a protectable trade secret”].)
*12 “ ‘[R]easonable efforts to maintain secrecy have been held to include advising employees of the existence of a trade secret, limiting access to a trade secret on “need to know basis,” and controlling plant access.’ [Citations.]” (Whyte v. Schlage Lock Co., supra, 101 Cal.App.4th at p. 1454.) “Requiring employees to sign confidentiality agreements is a reasonable step to ensure secrecy [citation]” as is proprietor's consideration of “such information to be confidential.” (Ibid.)
“A violation of the UTSA occurs when an individual misappropriates a former employer's protected trade secret client [or customer] list, for example, by using the list to solicit clients [citation] or to otherwise attain an unfair competitive advantage [citation].” (Reeves v. Hanlon, supra, 33 Cal.4th at p. 1155.) “ ‘Misappropriation’ means: [ ] (1) Acquisition 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; or [ ] (2) Disclosure 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....” (Civ.Code, § 3426.1, subd. (b)(1), (2)(A), (B)(i)-(iii).) “ ‘Improper means' includes theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means. Reverse engineering or independent derivation alone shall not be considered improper means.” (Civ.Code, § 3426.1, subd. (a).)
The UTSA thus may be violated also where the misappropriation of a trade secret is committed by someone other than a former employee and may transpire subsequent to the original transgression. (See, e .g., PMC, Inc. v. Kadisha (2000) 78 Cal.App.4th 1368, 1386 [liability may be premised on refusal of defendants, who knew or had reason to know of prior misappropriation by codefendants, to cease using stolen trade secrets, namely, participated in and authorized ongoing illegal usage].) “The owner of the trade secret is protected ... against the appropriation of the secret by improper means and the subsequent use or disclosure of the improperly acquired secret.” (Cadence Design Systems, Inc. v. Avant! Corp. (2002) 29 Cal.4th 215, 222.) Accordingly, “[a] misappropriation within the meaning of the UTSA occurs not only at the time of the initial acquisition of the trade secret by wrongful means, but also with each misuse or wrongful disclosure of the secret.” (Id. at p. 223.) For instance, “[e]mploying the confidential information in manufacturing, production, research or development, marketing goods that embody the trade secret, or soliciting customers through the use of trade secret information, all constitute [such misappropriating] use. [Citation.]” (PMC, Inc. v. Kadisha, supra, 78 Cal.App.4th at p. 1383.)
(1) Research and Development Data Trade Secret Issues
*13 Material triable issues of fact remain regarding whether CPC's research and development data qualify as trade secrets. In granting summary judgment in favor of the Mango defendants and ALLC, the trial court proceeded under the mistaken premise that CPC was claiming the contents of its marketed posters are the trade secrets at issue. But neither Mango, ALLC, nor CPC asserts that Mango or ALLC (or both) copied any of CPC's marketed posters. Rather, the crux of CPC's claim is that its former two employees Bremner and Danielle, each of whom signed a “Confidentiality Agreement” and an “Agreement Not to Disclose Use Trade Secrets,” stole CPC's confidential research and development data upon leaving CPC's employ for the purpose of using, and, along with Tsai, ALLC, and Mango, used that data to compete unfairly with CPC by producing posters identical to CPC's. Properly framed the issue then is whether CPC's research and development data, including the contents of any unpublished poster, constitute trade secrets.
A reasonable inference could be drawn by the trier of fact that the striking errors on ALLC's Michigan, Maine, California, and Louisiana state posters and the unique language of its anti-discrimination poster, all of which were identical to those in CPC's research materials, constituted evidence that these posters were derived from CPC's research and development databases. Also, there was evidence that ALLC could not have compiled its posters within the given timeframe based on independent research.
In opposition to both summary judgment motions, Patricia Blum stated in her respective declarations that a “trade secret document identified by CPC is its database keeping track of legislative changes for the federal and state labor laws” and that “the detailed data compiled by CPC in [this database] are not publicly available elsewhere and are the result of years of compilation and research.”
Patricia further stated that when CPC first started, it took “at least five years of time and expense to create the initial 51 posters[, namely, the “labor law posters for all 50 states as well [as] one nationwide (including the American Virgin Islands, Guam, and Puerto Rico) poster containing required federal postings”]. Given the small number of people [ALLC] claims that it had working on its research, it would have been physically impossible for ALLC to have produced its federal poster and its posters for all 50 states in just the few months that it had. In that time, ALLC could not have (1) researched all of the postings under federal laws and the laws of all 50 states to determine which ones were legally required, (2) located and then contacted all of the federal and state agencies (and found the names of the appropriate contact persons) where the postings might be obtained, (3) received all of the required postings from all of these bureaucratic agencies in a timely manner, and (4) then laid out and created the final poster products. Further, some of the required postings in certain states would have been out of print and not available from the agencies.”
*14 Additionally, Patricia explained that “[c]reating each poster requires months of work. CPC had to research federal laws as well as the laws of all 50 states to determine which legal postings were required in the workplace. CPC then had to obtain the original postings from the various federal and state agencies in order to incorporate this information into a single poster for each jurisdiction. This process has to be done continuously in order to ensure that all of our posters are up to date.” Moreover, “[p]osters may also contain non-mandatory elements and postings. Until the posters are released onto the marketplace, the precise design and contents are trade secrets and confidential to CPC.”
In her ALLC opposition declaration, Patricia added: “CPC became the first company to develop these posters and eventually built a successful company selling these posters throughout the United States.” She stated: “To create these posters, CPC employed a staff of researchers to ensure that the posters were accurate and up to date. The comprehensive detailed source and contact information for the research materials have never been publicly available anywhere and comprised part of [CPC]'s proprietary information. Further, there was (and still is) no current, accurate, and publicly-available list showing which postings are required, suggested, or merely voluntary. This compilation of data and research information comprises part of the proprietary information that ALLC misappropriated.”
Attached to her declaration was a “copy of exemplar pages from a CPC Poster Revisions chart that tracks legislative history as they affect labor law postings,” about which she explained: “There is no publicly available source that contains the same comprehensive, accurate, and up to date information. It is not a matter of simply calling up an agency to ask what postings should go on a poster. Most agency employees do not keep track of pending legislation that might affect the required postings (as CPC does). The employees also do not always provide accurate information as to which postings are required and which are not. CPC's research data reflects research that is accurate and confirmed to be accurate. [ ] ... Eventually, CPC's research data is used to create CPC's Checklists that summarize the mandatory and non-mandatory postings for each jurisdiction.”
Also attached to Patricia's declaration was a copy of the anti-discrimination posting, namely, “ ‘The American Policy is Our Policy. Anti–Discrimination Notice,’ “ which she “created and which exists in CPC's computerized research files.” She stated that ALLC's posters had “this exact language” although there was no government posting with this language combination. In her ALLC opposition declaration, Stout stated that in reviewing ALLC's research files, she found that “instead of providing the original source documents for this posting, ALLC merely produced a photocopy of this posting that it had copied from one of ALLC's own posters.”
*15 Stout further stated that during her inspection of “the originals of documents produced by defendants,” she noted “many of the postings received from state agencies had been ‘whited out’ on the bottom right corner and dates had been written over the white out.” Also, “[i]n ALLC's California research files that were ordered produced ..., there are no postings that would confirm ALLC researched its first California poster except for one website printout dated December 31, 2001 for ‘ “Time Off to Vote Notices.’ There were no other postings with receipt dates prior to mid-April 2002, which is when [Danielle] testified that ALLC had completed its entire product line of labor law posters.”
In his ALLC opposition declaration, James Li, a CPC attorney, explained that on the afternoon before the September 26, 2003 hearing on the Mango defendants' summary judgment motion, “defendants produced 2,448 pages of documents that were subject of three prior discovery orders. These last minute documents included telephone records, E-mails, research materials, (among other items) that [CPC was] now able to use for [its ALLC] opposition.” He added that since that hearing, “the deposition transcript for ... Danielle ... and former [ALLC] employee Ernest Brambila ... have been received.”
Li stated that after comparing the “telephone logs against the telephone numbers logged by [ALLC employee] Maria Meneses as being the numbers to call to obtain California postings,” Li “confirmed that there were no toll or long distance calls made by Mango or ALLC to any California agencies to obtain the documents for these postings during the December 2001 time when [Danielle] testified she started her research.”
(2) Customer List and Marketing Data Trade Secret Issue
Similarly, material questions of fact exist regarding the issue of whether CPC's customer list and its marketing data constituted a trade secret. Patricia Blum stated in her respective declarations in opposition to both summary judgment motions that “CPC's customer and contact lists are a compilation developed over a period of years, of names, addresses, and contact persons. CPC's sales data contains the sales history of each client as well as what they paid. While the market for labor law poster is broad, there are certain key customers that are able and willing to buy in bulk. These lists are not readily ascertainable from public sources. Rather, the data at issue in this lawsuit were the result of years of marketing, ongoing contacts, and in-person meetings by CPC.” She explained that “CPC's contact lists identify not only the agencies from which postings are obtained but also the contact persons to obtain such information. CPC has built up relationships with these contact people so that it is sometimes able to obtain advance information regarding postings that have not yet been released.” “[T]he detailed data compiled by CPC in [this database] are not publicly available elsewhere and are the result of years of compilation and research.” In her ALLC opposition declaration, Patricia attached a copy of “a CPC contact list exemplar, which has been identified as one of CPC's trade secrets,” and she stated “[t]here is no publicly available source that contains the same comprehensive, accurate, and up to date information.”
(3) Misappropriation Issues
*16 Misappropriation of CPC's research and development data could be inferred from: (1) the same evidence that the errors or unique language on certain ALLC's posters were identical to those found in CPC's research and development data; (2) the evidence that prior to her departure from CPC, Bremner was observed downloading data from the CPC computer and taking home unmarketed drafts of CPC labor law posters; (3) the evidence that on the day of Bremner's departure from CPC, Patricia Blum observed a computer disk in her purse; (4) the evidence that before quitting CPC, Stout saw Danielle printing out customer lists; and (5) the evidence that after Danielle left, her Sales Training Manual was missing.
Additionally, in her ALLC opposition declaration, Stout stated: “I have compared the GovDocs.com list for Massachusetts, which states that the ‘Parental Leave’ posting is recommended but not mandatory. [CPC] included this posting in its computerized research materials that was later made into a poster. However, CPC referred to this document as ‘Maternity Leave,’ and not as ‘Parental Leave.’ ALLC's list also referred to this posting as ‘Maternity Leave.’ “
And Brambila, a former ALLC employee, testified in his deposition that when he began with ALLC in January 2002, he was provided with what he considered to be an employee handbook containing all the federal state and OSHA postings and that Castro, another ALLC employee, told him Danielle was training Castro with a book that had Global Compliance (CPC's other name) on it.
In his respective declarations in opposition to both motions, Michael Blum, CPC's secretary and treasurer, stated that during 2001, “CPC averaged fewer than a total of 15 employees.” Danielle was “one of CPC's two key sales employees” and she was entrusted “with access to all of CPC's confidential sales data, marking information, and customer information. In her position, she acted as CPC's agent and had the authority to bind CPC in bidding on jobs.” “Bremner was head of CPC's Research Department” and she was provided “access to all of CPC's confidential research information, including access to products and data that had not yet been released onto the market. In her work, [she] also had access to CPC's confidential sales data, marketing information, and customer information.” In his ALLC opposition declaration, Michael further stated that “as part of her job, [Danielle] had access to CPC's research materials.”
Michael further stated in his respective declarations that Robert performed services for CPC for which Danielle was given a $900 bonus. Robert had “access to all of CPC's financial information because of his background as a financial professional” and Michael trusted him with “access to CPC's confidential financial and business data. Robert advised Michael on how to structure his businesses, CPC's operation and finances, and drafted on behalf of CPC key documents, including non-disclosure/confidentiality agreements; a dealer agreement, dealer pricing information, pricing schedule, and other agreements. Robert had “access to CPC's detailed pricing information and also advised [him] on discount schedules for retail and distributor agreements.” He would “estimate potential sales as well as calculate pricing and cost figures for CPC's poster products .” And Michael observed Robert and Danielle, his wife, work together on more than one occasion “in Danielle's cubicle to calculate bids and draft proposal letters that Danielle would make for the sale of CPC posters.” Danielle, Robert, and Bremner each had passwords allowing them access to CPC computers and “they were usually left alone to perform their work.”
*17 Similarly, there was other evidence from which the trier of fact could find that defendants misappropriated CPC's customer lists. In his ALLC opposition declaration, to which ALLC did not object below, James Li, a CPC attorney, stated that upon examination of ALLC's “decoy list” of clients, namely, clients that could be verified to have received the mailing solicitation, Li found that 16 of the 36 entities on ALLC's list also appeared on CPC's client list. Danielle stated in a declaration that the decoy list was drawn from Mango's customer list but also from employees of Mango and ALLC.
In her respective opposition declarations, Stout stated that she observed Danielle printing out CPC customer lists before quitting CPC. In her ALLC opposition declaration, Stout further stated that she also found missing Danielle's “Rolodex, which contained CPC client data[.]”
In his ALLC opposition declaration, Li stated that on the afternoon before the Mango defendants' summary judgment hearing, “ALLC produced 2,448 pages of documents. Among [them] was an E-mail dated January 23, 2002 (i.e., just 20 days after ALLC was incorporated and 14 days after Roberta Bremner left CPC). This E-mail was from Danielle ... to David Ohringer regarding the mailing of an ALLC flyer soliciting customers to purchase ALLC's California labor law posters.... In that E-mail, [Danielle] instructed ... Ohringer to place 36 specific third-party entities on his ‘decoy list.’ I compared this list with [CPC]'s customer list, it has been confirmed that sixteen of these entities match with companies in [CPC]'s database by name and/or address.” (Emphasis omitted.)
In opposition to ALLC's summary judgment motion, CPC presented the declaration of Patricia Blum and Phillip Zee of Accuform Signs to demonstrate that Danielle solicited a CPC customer on behalf of ALLC. Accuform was a client and distributor of labor law posters from CPC from 2000. While Zee was manning the Accuform booth at the National Safety Counsel Congress & Expo 2002 in San Diego, a major annual event, Patricia observed Danielle and Ron Castro, an ALLC representative, walk toward Zee, and while Danielle hung back, Castro approached and talked to Zee. Castro held himself out to be an ALLC representative and tried to solicit Accuform's patronage. This was improper because ALLC did not have a booth at the event. Before this time, Zee “never had any prior contact with ALLC, nor did [he] ever ask anyone from ALLC to try to sell [him] any of its products.” In his Mango opposition declaration, Michael Blum stated Robert performed work on behalf of CPC. Copies of certain documents Robert drafted, including both an information sheet and an Internet dealer license agreement for Accuform, were provided as examples.
In her ALLC opposition declaration, Patricia stated that many of the companies identified in the declaration of Ernest Brambila, a former ALLC employee, the January 23, 2002 e-mail from Danielle to Ohringer, and the September 19, 2002 letter from Danielle to the Monrovia Police Department in which she “listed 47 major customers of ALLC” who “were clients of CPC and are known by [Danielle] to be CPC clients.” As examples, Patricia referred to Baja Fresh, The Walking Company, Patagonia, “the Kroeger Company, which included Ralphs Supermarkets,” PacificCare, In–N–Out, and Mattel Toys.
(4) Reversal of Summary Judgments Mandated
*18 We conclude that the existence of the above triable issues of material fact mandate reversal of the summary judgments in favor of the Mango defendants and ALLC.
C. Attorney Fee Awards Discussion
Under the Uniform Trade Secret Act (Civ.Code, § 3426 et seq.), “[i]f a claim of misappropriation [of trade secret(s) ] is made in bad faith, ... the court may award reasonable attorney's fees to the prevailing party.” (Civ.Code, § 3426.4.) “ ‘[B]ad faith’ for purposes of section 3426.4 requires objective speciousness of the plaintiff's claim, as opposed to frivolousness, and its subjective bad faith in bringing or maintaining the claim.” (Gemini Aluminum Corp. v. California Custom Shapes, Inc. (2002) 95 Cal.App.4th 1249, 1262.)
We need not address or resolve the controversies raised. Reversal of the challenged attorney fee awards is mandated in view of the reversal of the summary judgments based on the existence of triable issues of material fact.
D. Monetary Discovery Sanctions Discussion
ALLC and Mango challenge the monetary discovery sanctions imposed for failing to comply with the underlying discovery order. Their substantive claim is that they complied because, among other things, they produced the paper hard copy version of the documents and they were not obligated by law to provide a CD–ROM version. They make these procedural claims: (1) the absence of the method for calculating the attorney fees renders the award defective and (2) the referee lacked jurisdiction (Code Civ. Proc., § 1008). We uphold both awards.
CPC moved for an order compelling ALLC and Mango to comply with the April 9, 2002 discovery order for production of documents and monetary sanctions against Mango and its counsel and against ALLC.
At the July 28, 2003, hearing, CPC informed the discovery referee that Mango failed to produce any of the requested documents. Although acknowledging some documents were produced in paper form, CPC explained that production of the computer files was crucial, namely, the electronic data showing the dates when the computer documents were created and accessed, and when the research and early drafts to ALLC's posters were done. This data was relevant to whether ALLC stole CPC's proprietary information. The referee granted the motions to compel and awarded monetary sanctions against Mango and its attorneys, jointly and severally and only against ALLC, which had new counsel.
On August 1, 2003, a hearing was held to discuss the wording of order setting forth the July 28 rulings. ALLC and Mango, however, argued the sanctions should be set aside for lack of notice about the factual basis for the amounts of attorney fees. The referee reversed the sanctions order without prejudice. He explained: “The only reason why I am not imposing sanctions ... is ... the notice is not detailed enough, not [because of] the impropriety of sanctions.” He invited CPC to renew its motion with additional details about costs.
*19 CPC filed its renewed sanctions motion. ALLC and Mango opposed it on the grounds the motion was not supported by facts justifying the amounts sought and sanctions were unwarranted because they had in fact complied with the discovery order. The motion was granted. The order awarding CPC $6,300 against ALLC and $3,000 against Mango and its counsel was filed on October 3, 2003.
Contrary to ALLC and Mango's claim, the discovery referee had inherent authority to reconsider its prior ruling denying CPC's sanction motion without prejudice, which it exercised by inviting CPC to file another motion and granting it. (LeFrancois v. Goel (2005) 35 Cal.4th 1094, 1107 [holding Code of Civil Procedure “sections 437c and 1008 limit the parties' ability to file repetitive motions but do not limit the court's ability, on its own motion, to reconsider its prior interim orders”].) And CPC was not precluded from renewing its sanction motion based on a declaration providing the requisite omitted facts. In 2003, a sanction motion was required to be “accompanied by a declaration setting forth facts supporting the amount of any monetary sanction sought” (former Code Civ. Proc., § 2023, subd. (c)). But the movant was not foreclosed from supplying a supplemental or new declaration by that provision or any other provision of the former Civil Discovery Act of 1986 (former Code Civ. Proc., § 2016 et seq. [repealed by Stats.2004, ch. 182 (Assem. Bill No. 3081), § 22, operative July 1, 2005] ).
ALLC and Mango assert the sanction awards must be vacated, because the referee was required to, but failed, “to specify his method of calculating the amount of attorney's fees ... as sanctions for failure to respond to discovery requests.” As authority, they cite Sauer v. Superior Court (1987) 195 Cal.App.3d 213. Their reliance is misplaced on Sauer, in which the appellate court held the opposite: “Contrary to Sauer's assertion, the referee was not required to specify his method of calculating the amount of attorney's fees.” (Id. at p. 225, fn. 6.)
In their reply brief, “Mango and ALLC agree with the general premise that computer disks containing information relating to the action are discoverable.” Their position is that they were not obliged to produce a CD–ROM version of the hard copy of documents already produced, because “[t]he discovery statutes simply do not require a party to create documents in a particular format so that they may be produced.” (Emphasis omitted.) Their position is untenable. They were asked to supply a copy of the existing documents in the CD–ROM format, not to create a new CD–ROM document. As James Li, a CPC attorney explained at the July 28 hearing, “We are not asking for you to create documents. We're asking you [to] create a CD that contains documents you already have. And as we discussed before, these are Microsoft Word documents, Adobe illustrator file, download jobs, any graphic files, any files in electronic version that were used to create postings or posters.”
*20 ALLC and Mango argue they should not have been required, at their expense, to provide the documents in the CD–ROM format, because that is not how their documents were “kept in the usual course of business[.]” (Code Civ. Proc., § 2031, former subd. (g)(1), now subd. (f)(1).) They do not dispute that the documents at issue were “kept” in their computer. A CD is simply a copy of the electronic data on the computer. Just as photocopying is proper for copying a document in paper form, downloading computer files onto a CD is an appropriate means for copying the electronic data on a computer's hard drive. Any right to reimbursement was waived by their failure to request that CPC pay for the CD(s).
The summary judgments and their attendant attorney fee awards are reversed (B172497, B173706, B174694). The $6,300 discovery sanction award as to American Labor Law Company is affirmed (B171017). The appeal from the $3,000 discovery sanction award as to Mango Graphics Corporation and its attorneys, jointly and severally, is deemed to be a petition for an extraordinary writ of mandate and denied (B171017). Global Compliance, Inc., doing business as Compliance Poster Company, shall recover its costs on appeal.
I concur: ROTHSCHILD, J.
I concur in the judgment only: VOGEL, J.
The $6,300 sanction order against ALLC is appealable. (Code Civ. Proc., § 904.1, subd. (a)(12) [order directing payment of more than $5,000 monetary sanctions appealable].) The $3,000 sanction order against Mango is deemed to be a petition for an extraordinary writ of mandate and shall be denied. (Code Civ. Proc., § 904.1, subd. (b).)﻿
Doe v. Davis
2019 WL 4247753 (Tenn. App. 2019)