Court Opinion

ID: 4229905
Source: CourtListenerOpinion
Date Created: 2017-12-18 22:34:43.553752+00
Date Added: 2024-06-11T09:00:11.185412
License: Public Domain

FAY
                                                Cr.UT OF
                                                   VCE OF
                                                            :j I i •    11-J
                                                     I

 IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

 GUIDANCE RESIDENTIAL, LLC ,                  )
                                              )          No. 75507-2-1
        Appellant/Cross Respondent,           )
                                              )          DIVISION ONE
              v.                              )
                                              )          UNPUBLISHED OPINION
 ANWER MANGRIO and JANE DOE                   )
 MANG RIO, husband and wife, and their        )
 marital community; MOHAMED AIJAZ             )
 HUSSAIN and JANE DOE HUSSAIN,                )
 husband and wife, and their marital          )
 community; UNIVERSITY ISLAMIC                )
 FINANCIAL CORPORATION; and                   )
 UNIVERSITY BANK,                             )
                                              )
       s Respondents/Cross Appellants.        )          FILED: December 18, 2017
                                              )
       APPELWICK, J. — Thejury found that use by former employees of client lists

compiled   while employed      by Guidance        was a     willful and        malicious

misappropriation of trade secrets. But, the trial court declined to award exemplary

damages to Guidance. The trial court sealed trial exhibits related to client lists

posttrial. Mangrio challenges the determinations that the client lists were trade

secrets, that they were misappropriated, the determination of damages, the award

of attorney fees, and the sealing of the trial exhibits.     Mangrio successfully

defended against Guidance's breach of contract claims under a contract providing

for recovery of fees actually incurred. The trial court awarded Mangrio fees using

the lodestar method. Guidance challenges the use of the lodestar method and the

failure to award exemplary damages.
No. 75507-2-1/2

      We affirm that the client lists were trade secrets, the jury verdict for

misappropriation, and the sealing of the trial exhibits. We vacate the award of

attorney fees to Mangrio on the contract claims using the lodestar method and

remand for award of fees actually incurred consistent with the contract. We vacate

the trial court's denial of exemplary damages to Guidance, and remand for

reconsideration.

                                     FACTS

       Guidance Residential LLC and competitor University Islamic Financial

Corporation (U IF), provide Sharia-compliant mortgages to the Muslim community.

The Sharia-compliant mortgage industry is extremely competitive, as there is a

limited pool of customers from which to draw. In 2011, Guidance employees,

Anwer Mangrio and Mohamed Hussain, along with others, left Guidance to work

for competitor, UIF.

       At Guidance, the former employees collected information about potential

customers and compiled potential and current customer lists.          The former

employees testified that they kept personal lists of contacts that included names,

phone numbers, and e-mail addresses. After the customer showed interest in

prequalification or refinancing, the employee entered the potential customer's full

name, phone number, e-mail address, and information about their property into

Guidance's loan operating system. Guidance contended that, in part, what makes

                                          2
No. 75507-2-1/3

its lists distinctive is that a person's presence in their database indicates that the

person has at least sought to be prequalified for a Sharia-compliant mortgage.

       After the information was entered into Guidance's system, each employee

could access a "Book of Business," an Excel spreadsheet created by the operating

system. The Book of Business contains the information the employee entered into

the Guidance system, as well as information the disbursed contracts automatically

updated. The Book of Business includes customer name, contract share, contact

information, such as address, telephone number and e-mail, address and type of

property for which services were sought, credit score, total income, and total

liability. Guidance required its employees to protect customer information and

keep this information confidential.

       Before the former employees left Guidance, they downloaded and e-mailed

the Books of Business they could access to their personal accounts. Former

employee, Hussain, directed other former employees to download the Books of

Business. At U1F, Hussain assisted Guidance's former employees in contacting

"closed customers" from Guidance, to generate business for U1F. Hussain also

assisted Guidance's former employees target other categories of Guidance

customers, such as those listed as "withdrawn," "declined," and "pipeline."2

      1 The Books of Business files organize Guidance potential and current
customers into categories. "Closed" indicates that the application resulted in a
closed mortgage, or funded loan.
      2 "Withdrawn" customers are those that did not continue with the application
process after being prequalified. "Declined" customers are those whose

                                            3
No. 75507-2-1/4

       Guidance filed suit against former employees, Mangrio and Hussain, their

new employer, (UIF), and UIF's parent company, University Bank. Among other

claims, Guidance alleged that Mangrio and Hussain breached noncompete

clauses in employee contracts and duties of loyalty. The trial court, finding the

noncompete clauses void, dismissed Guidance's breach of contract claims on

summary judgment. That decision is not appealed. Guidance also alleged that all

four respondents misappropriated Guidance's trade secrets, namely its customer

and prospect lists.

      After a lengthy trial, the jury returned a verdict in favor of Guidance's claim

of misappropriation of trade secrets, but rejecting Guidance's breach of duty

claims. The jury found that Mangrio, Hussain, UIF, and University Bank (hereafter

collectively referred to as "Mangrio" unless otherwise indicated) had engaged in

actions that were "willful and malicious" under the Uniform Trade Secrets Act

(UTSA). RCW 19.108.030. The jury awarded $848,000 in damages to Guidance

for the financial harm caused from the misappropriation of trade secrets. The jury

did not find that there had been unjust enrichment. Subsequently, the trial court

denied the defendants' motions for a directed verdict and for judgment as a matter

of law on Guidance's trade secret claim.

applications did not result in closed mortgages. "Pipeline" customers are those
who have open applications with Guidance.

                                           4
No. 75507-2-1/5

      After the verdicts, Guidance moved for an award of exemplary damages,

prejudgment interest, and reasonable costs and attorney fees for prevailing on the

UTSA claims. The trial court declined to award exemplary damages to Guidance.

The trial court awarded the corrected amount of $582,378.37 in attorney fees to

Guidance, after considering the amount of time counsel spent on successful

versus unsuccessful claims, the hours reported to the court, and the

reasonableness of counsel's hourly rates. The court also awarded $11,271.85 in

costs to Guidance.

       After trial, the court issued an order partially granting Guidance's motion to

seal trial exhibits, sealing exhibits containing customers' restricted personal

identifiers, such as Social Security numbers and telephone numbers, until

presentation of copies with that information redacted. The trial court subsequently

granted Guidance's order for reconsideration of the scope of order sealing

confidential trial exhibits. It further sealed exhibits containing consumer e-mail

addresses, credit scores, and household incomes and liabilities where the

information is tied to an individual in a document, until presentation of copies with

that information redacted.

       Mangrio moved for attorney fees for prevailing on the noncompete contract

claims. The court awarded Mangrio $182,135.25 in attorney fees and $5,878.20

in costs. The trial court calculated defense counsel attorney fees using reasonable

                                           5
No. 75507-2-1/6

hourly rates from Guidance's declarations, and not fees charged by Magrio's

counsel.

                                     DISCUSSION

  I.   Mangrio's Cross Appeal Claims

       The linchpin of this case is whether Mangrio misappropriated Guidance's

trade secrets under the UTSA. Therefore, we first address Mangrio's claim on

cross appeal that the trial court erred in denying his motions for judgment as a

matter of law on the trade secret claims. Second, we address Mangrio's claim that

the trial court erred in awarding attorney fees to Guidance. Third, we address

Mangrio's argument that the court erred in granting Guidance's motion to seal

confidential exhibits after trial.

       A. Judgment as a Matter of Law

       Mangrio argues that the trial court erred in denying his motions for judgment

as a matter of law as to Guidance's trade secret claims. First, he argues that, as

a matter of law, Guidance's claim as stated was not a violation of the UTSA,

because the personal contact lists and Books of Business the former employees

retained when they went to UIF were not trade secrets. He contends that the

personal contact lists were not trade secrets, because Guidance never had

possession of them. And, the Books of Business were not trade secrets, because

all the valuable information they contained was available elsewhere. Second, he

argues there was no substantial evidence that Guidance suffered lost profits, and

                                          6
No. 75507-2-1/7

that Guidance failed to provide a reasonable method to calculate lost profit

damages.

       This court reviews de novo a trial court's order denying a motion for

judgment as a matter of law. Estate of Bordon v. Dep't of Corr., 122 Wash. App. 227,

240,95 P.3d 764(2004). In reviewing the ruling on the motion, this court interprets

the evidence against the original moving party and in a light most favorable to the

opponent. Faust v. Albertson, 167 Wash. 2d 531, 537-38, 222 P.3d 1208(2009). A

judgment as a matter of law requires the court to conclude that, as a matter of law,

there is no substantial evidence or reasonable inferences to sustain a verdict for

the nonmoving party. Id. at 538. The court must defer to the trier of fact on issues

involving conflicting testimony, credibility of the witnesses, and the persuasiveness

of the evidence. State v. Hernandez, 85 Wn. App. 672,675, 935 P.2d 623(1997).

Overturning a jury verdict is appropriate only when the verdict is clearly

unsupported by substantial evidence. Faust, 167 Wash. 2d at 538. Judgment as a

matter of law is appropriate only when there is no substantial evidence to support

a verdict. Id. at 537.

       1. The Book of Business Client Lists Were Trade Secrets

       To establish a trade secret misappropriation claim, a plaintiff must show that

a legally protected trade secret exists. Ed Nowoproski Ins., Inc. v. Rucker, 88 Wn.

App. 350, 356-57, 944 P.2d 1093 (1997), affd, 137 Wash. 2d 427, 971 P.2d 936

(1999). Under the UTSA

                                           7
No. 75507-2-1/8

      "Trade secret" means information, including a formula, pattern,
      compilation, program, device, method, technique, or process that:

              (a)    Derives independent economic value, actual or
       potential, from not being generally known to, and not being readily
       ascertainable by proper means by, other persons who can obtain
       economic value from its disclosure or use; and

             (b)   Is the subject of efforts that are reasonable under the
       circumstances to maintain its secrecy.

RCW 19.108.010(4). Whether a customer list is protected as a trade secret

depends on three factual inquiries: (1) whether the list is a compilation of

information;(2) whether it is valuable because unknown to others; and (3) whether

the owner has made reasonable attempts to keep the information secret. Rucker,
137 Wash. 2d at 442.

       In Washington, generally customer lists belonging to the employer are trade

secrets. See Thola v. Henschell, 140 Wash. App. 70, 78, 164 P.3d 524 (2007)

("Generally, taking an employer's confidential customer list without permission is a

trade secret misappropriation."). However, there is a distinction between customer

lists of names or information that is readily ascertainable and lists that contain

information that the employer expended substantial efforts to identify, cultivate,

and keep confidential. See Robbins, Geller, Rudman & Dowd, LLP v. Office of

Att'v Gen., 179 Wash. App. 711, 722, 328 P.3d 905(2014); see also Calisi v. Unified

Fin. Servs., LLC, 232 Ariz. 103, 106-07, 302 P.3d 628 (2013)(applying Arizona's

UTSA, which employs the same definition of "trade secret").3; see also McCallum

       3 Almost all states have enacted the UTSA (or some version thereof) to
make uniform traditional common law trade secret protections. Thola, 140 Wn.
App. at 78. "This chapter shall be applied and construed to effectuate its general

                                           8
No. 75507-2-1/9

v. Allstate Prop. & Cas. Ins. Co., 149 Wash. App. 412, 424, 204 P.3d 944 (2000)(a

key factor in determining whether information has economic value under the UTSA

is the effort and expense that was expended to develop the information).

       Mangrio asserts that, because the former employees maintained personal

contact lists which Guidance never possessed, Guidance did not have a

protectable trade secret in the Books of Business. The former employees kept

lists of their own with names and contact information.4 For instance, in former

employee Mangrio's testimony about making initial contact with potential

customers, he states,

       Q. . . . Let's say you go to a mosque, you put down your card, you
          meet people, and somebody is now interested in -- in getting an
          Islamic mortgage, okay? So they contact you. Now, will you --
          will you take us through the steps now of what happens?

       A. So, initially, when they contact me -- first time usually people call
          they ask questions. So I take their number -- phone number,
          email [sic] address, and name and enter it in my Outlook Express
          immediately. That's how I get my database.

purpose to make uniform the law with respect to the subject of this chapter among
states enacting it" RCW 19.108.910.
        4 The Washington Supreme Court has held that trade secrets include copied
lists of customers or information about them, that the former employer is still in
possession of such information, even when the former employees added to such
lists. See J.L. Cooper & Co. v. Anchor Sec. Co., 9 Wash. 2d 45, 64-65, 113 P.2d 845
(1941). While J.L. Cooper predates the UTSA, our Supreme Court has held that
the common law rule prohibiting the solicitation of a former employer's customers
with confidential information remains intact under the UTSA. Nowoqroski, 88 Wn.
App. at 357. In J.L. Cooper, the court noted that lists of customers, even when
partly prepared by the defendant, are the absolute property of the employer. 9
Wash. 2d at 65. Further, the court noted that employers are entitled to relief when
former employees, for their own interests or for a new employer's, use lists of
customers that were acquired because of their former employment and regarded
as confidential. Id.

                                            9
No. 75507-2-1/10

       The evidence clearly established that the former employees compiled lists

of customer information for Guidance while employed by Guidance. In testimony

from witness Suha Zehl, the former chief information officer with Guidance, she

explained that employees enter customer data initially into Guidance's CRM (point

of sales system) system:

       Q. . . . And so could you maybe walk me through to how data gets
          into these various systems if we started with point of contact with
          an account executive and a potential customer?. . .

       A. ...[Account executivels are trained and have been told that any
          customer information needs to be entered into the CRM even if
          the customer was not ready to move forward because we have
          to track that information. . . .

       Q. ... What use do you make of the data in the CRM system? What
          are you doing with that data?

       A. The first thing is you need to understand what's -- you know,
          what's the required information. To get a prospect, we need their
          name, we need their e-mail [sic], we need their phone number
          so that we have a prospect or a lead to- -- to move forward with.

      The contact information undisputedly became part of the information which

was maintained in the Guidance system in the Book of Business to which the agent

had access. The fact that the agent kept a duplicate, personal copy of contact

information did not change the fact that the information was collected in the course

of employment, not from public sources but from potential clients, and was entered

into Guidance system. Guidance had possession of the information in the Book of

Business.

                                           10
No. 75507-2-1/11

      Zehl testified that once customers express interest in prequalification,

employees obtain more of the customer's information for Guidance's LOS

(alternatively loan origination system or loan operating system). Former employee

Mangrio also testified about when he entered information into Guidance's system:

     A.     . .. If the customer interested [sic], then ask -- then ask them full
            information, their other-- like, you know, if they want to prequalify,
            then we need how much property — purchase price they want for
            the property, how much down payment can there be, and then
            there's also good number all [sic] of the information

       Q. And then where does that go?

       A. That information goes in an LOS system -- where the [sic]
           Guidance has an LOS system. . . .

       Q. Loan operation—or operating system?

       A. Loan operating system, yes.

The evidence showed that the information in the customer lists included items not

available in public records. In testimony about information in Guidance records in

exhibit 44, UIF Chief Operating Officer, Julie Burzynski, states,

       Q.     . . . So is there anywhere in the public records you can find
       individuals who have prequalified?

       A.     Likely no.

                                              11
     No. 75507-2-1/12

And in testimony from former employee Hussain,

           Q.   Okay. If you have a universe, say, of 5,000 (inaudible). . .

           Q. . . . And that universe of contacts, absent information from the
               LOS, you would have no way of knowing these individuals'
               interests or whether they had been prequalified for a Shariah-
               compliant [sic] mortgage?

           A.   That's correct, yes.
           Mangrio contends that the valuable information that the Books of Business

     contained was available elsewhere.      He asserts that Guidance waived any

     protectable trade secret, because information about customers who successfully

     obtain a loan or mortgage would be available in the recorded deed or mortgage.

     He relies on testimony from Burzynski, in which she states,

           Q:    . . . But I want to go back to the public record part of your
                 testimony and the deeds.. . .

           Q:    -- and the mortgages. Is that something new?

           A.     No. They've been doing that for -- actually I don't know --
                  years and years and years and years these have been part of
                  the public record. We see deeds from 50 years ago.

                      There are all kinds of different things that would come up
                  where we would get a copy of the things on public record. ...

           Q.     . . . UIF could obtain records of all Guidance Residential
                  transactions from the beginning of Guidance Residential's
                  existence?
No. 75507-2-1/13

       A.     If we wanted to, we could -- we could go out and get a copy
              of everything that was publicly recorded, yes.

He further argue that third-party companies could provide the customer information

for a fee.

       But, even if Mangrio could have compiled a list of former Guidance

borrowers from public records, Mangrio has not demonstrated that all of the other

information in the Book of Business files was publicly available. Nothing in a

recorded deed would indicate that the mortgage was Sharia-compliant, a factor

that distinguishes Guidance and UIF's customer base from mortgage customers

in general. The deed information would not have identified Guidance's customers

in the process of obtaining a mortgage or loan. Nor has he established that the

compilation of data—the linking of individual interest in Sharia lending, their

income, assets, liabilities, prequalification, credit scores, Social Security numbers,

prior history with Guidance and the like—was publicly available. Moreover, the

compilation of this information in the Book of Business gave the information

enhanced value. See Nowogroski, 137 Wash. 2d at 449-50.

       There was also evidence that Guidance took reasonable steps to protect its

trade secrets. At trial, Guidance presented evidence of its policies requiring

employees to keep information about clients confidential, such as the transaction

code of ethics in the employee handbook. The code instructs employees to

"[m]aintain absolute confidentiality of all consumers, as well as other 'inside

information" and to "[m]aintain the confidentiality of the underwriting process and

                                            13
No. 75507-2-1/14

system." The former employees signed forms acknowledging their receipt of the

employee handbook. There was testimony from former employee Hussain that he

acknowledged Guidance's privacy and confidentiality policies while employed:

      Q.   Okay. If we look at Exhibit 11, one of the things that it discusses
           is an employee code of conduct, correct?

      A.   Correct.

      Q.   And if you look on page 34, which is page 37 of the document,
           there's actually a specific policy section dedicated to
           confidential information and nondisclosure, correct?

      A.-Yes; correct.

      Q.   And this policy indicates that it applies both during employment
           and after you leave your employment, correct?

      A.   Correct.

      Q.   And that you must promptly return confidential documents and
           other materials you may have, correct?

      A.    Correct.

      Q.   And that you're not permitted to retain copies of any material,
           right?

      A.   Correct.

      Q.   It even tells you if you have questions, you should consult with
           the legal department. Maybe a little small there. Section 7
           there, right?

      A.   (No audible response.)

                                           14
No. 75507-2-1/15

      Q.       Did you ever have any questions about this? Do [sic] you ever
               consult the legal department about what was or wasn't
               considered protected under this policy?

      A.       No, I didn't.

      Q.       And then if we look in this same section, it appears this
               document goes on to explain a couple of particular types of
               information[5] that Guidance considers confidential, correct?

      A.       Sure.

      Q: Was that a "yes," correct?

      A.       Guidance considering it confidential, yes.

      Q.       Okay. And you had acknowledged that you were going to abide
               by this policy, right?

      A.       Correct.

      Q.       And one of the items is customer lists that we see?

      A.       Correct.

      5 The    employee handbook in this section states:

      The protection of confidential business information and trade secrets
      is vital to the interests and the success of Guidance Residential.
      Such confidential information includes, but is not limited to, the
      following examples:

           •    Compensation data
           •    Computer processes
           •    Computer programs and codes
           •    Customer lists
           •    Customer preferences
           •    Financial information of any type, including Guidance
                Residential and customer information

This indicates that Guidance clearly considered the Books of Business,
customer lists and customer information, confidential.
No. 75507-2-1/16

In addition to its written policies, Guidance notified its customers of its

confidentiality policy and its training of employees regarding its policies. Heidi

Partida, vice president of human resources employee at Guidance, testified,

      Q.     ... And, Ms. Partida, I think you had already started explaining
             this, but this is something that you provide to your customers,
             correct?

      A.     Yes, it is.

      Q.     And what -- you can read this or summarize for me -- do you
             tell your customers about what you will or won't do with their
             information?

      A.     We are committed to protecting our customers' privacy.
             Protecting their trust in us. They -- this document lets them
             know that during the course of our transaction with them, we
             are going to be collecting personal information -- Social
             Security number,financial status, pay information, all of these
             things -- that would not be available anywhere else. And we
             are committed to protecting their privacy and that information,
             so this is what we tell them. We are very highly regulated.
             We -- we need to let them know their information is safe with
             us.

      Q.     And it also appears to indicate on this document that you
             regularly conduct training sessions.

                     Is that something that's (inaudible)?

      A.     Yes, we do.

             It's not my area of responsibility. There is a compliance
             department that does that. But also the training -- all account
             executives and regional managers and national managers
             who are required to be licensed have to go through additional
             training and continuing education training by the states every
             year to let them know what this is about and the importance
             of customer privacy.

                                           16
No. 75507-2-1/17

      Q.     You mentioned licensing.

                   Do field sales employees of Guidance have to be
             licensed?

      A.     Yes, they do.

      Q.     And how about unlicensed people? Do you ever have
             situations where there were unlicensed people who were
             working in the field for Guidance?

      A.      Not for Guidance, no.

And, in terms of the licensing requirement, Hussain testified,

       Q.    And what did that licensing entail?

      A.     After the real estate crisis that we went through, the laws now
             require every loan originator to have a federal license, and
             you have to get this license first. You have to take 20 hours
             of classroom courses, and then you have to do some
             fingerprints and some other requirements. And once you fulfill
             them and you pass an exam, then you become NMLS
             [nationwide mortgage licensing system] federally licensed,
             and then there are some states that require their own specific
             licenses as well.

       Q.     And as part of that licensing or to maintain your license, do
              you have to take continuing education?

       A.     Yes, you do.

       Q.

                     What subject maters are covered in these (sic)
              licensing-required education?

       A      You know, I don't remember. I took the 20-hour course back
              in 2008, 2009. They cover various things, including, as you're
              leaning towards, ethics and so forth.

                    So, yeah. It's -- it covers -- it covers a gamut of subject
              matter the government wants you to learn and understand.
No. 75507-2-1/18

              Mostly it has to do with fraud prevention and how you treat
              customers and -- and so forth. That's what the gist of the
              training is.

       Q.     And do they talk about customer privacy?

       A.     I'm sure they do, yeah, because customer privacy must be
              part -- I don't remember exactly, but I'm -- I'm sure customer
              privacy is part of it. You have to protect customers' personal
              information, and you have to shred it as soon as it will -- the
              loan is done.

              So you can't hang on to people's paychecks and W-2s and so
              forth, so all of that has to be shredded immediately. There are
              some very specific rules. You can't do certain things and so
              forth, yes.

       Therefore, there was substantial evidence before the jury that the'Books of

Business were compilations of information, that they contained valuable customer

information that was not readily ascertainable (even if a portion of the information

was publicly available), and that Guidance took reasonable steps to ensure the

confidentiality of its customer lists. These are the three elements of a trade secret.

See Nowoqroski, 137 Wash. 2d at 442.

       We conclude that the Books of Business were trade secrets.

       2. The Trade Secrets were Misappropriated

       The portion of the UTSA's definition of "misappropriation" that applies here

proscribes the disclosure or use of a trade secret of another without express or

implied consent by a person who, at the time of disclosure or use, knew or had

reason to know his or her knowledge of the trade secret was acquired under

circumstances giving rise to a duty to maintain its secrecy or limit its use. RCW

19.108.110(2)(b)(ii)(B). A former employee misappropriates an employer's trade

                                            18
No. 75507-2-1/19

secrets by soliciting customers from a confidential customer list that has

independent value, because its contents are unknown and subject to reasonable

efforts to keep secret. See Nowoqroski, 137 Wash. 2d at 449-50. The UTSA makes

no distinction about the form of trade secrets; whether the information is on a

compact disk, a hard paper copy, or memorize by the employee, the inquiry is

whether it meets the definition of a trade secret and whether it was

misappropriated. Id.

      The evidence before the jury clearly established that before the former

employees left Guidance, they downloaded and e-mailed the Books of Business

they could access to their personal accounts. Former employee Mangrio testified,

      Q.     . . . Mr. Mangrio . . . you left Guidance on March 31, 2011,
             correct?

      A.     That's correct.

      Q.     And do you recall the last time that you downloaded your book
             of business file. . . .

      A.     I don't remember the exact date, probably March. Because
             we used to update every month, every two weeks. When our
             -- anything change [sic], happen, I used to refresh it.

      Q.     And after you updated your book of business file in the March
             time frame, you emailed [sic] that to yourself, correct?

      A.     That's correct.
There was also evidence that former employee Hussain directed other former

employees to download the Book of Business before leaving Guidance. Junaid

                                         19
No. 75507-2-1/20

lqbal, an employee who left Guidance, joined UIF, and at the time of trial had

returned to Guidance testified,
      Q.     When you left, did you download your book of business?
      A.     Yes.
      Q.     Why did you do that?
      A.     In a recent conference call prior to departure, it was asked of
             us by Aijaz [Hussain].

      At UIF, Hussain directed Guidance's former employees to contact "closed

customers" from Guidance, to generate business for UlF.6 Hussain testified,

      Q.     And that's your second day at UIF, correct?

      A.     Sure . . . .

      Q.     And on that second day of work, you're telling them to—that
             you've created a letter for their closed customers, right?

      A.     Correct.

       Q.    And that's the customers that they worked with when they
             were at Guidance, correct?

      A.     Yes. Their customers they brought to Guidance by—through
             their marketing efforts, so, yes.

      6  Former employee Hussain sent an e-mail to the other former employees
who had joined UIF, Mangrio, lqbal, Zeeshan Ali, and Omer Mahmood,with a letter
for the team to send to the list of closed customers from Guidance. The letter
Hussain directed the other employees to send went beyond a professional
announcement announcing a change of affiliation and actively solicited business
for UIF. See Nowogroski, 137 Wash. 2d 427, 440 fn.4 (distinguishing former
employees active solicitation of customers and professional announcement of a
change of employment). It stated, in part,"UIFC offers financing under two Islamic
models . . . in most cases more competitively priced than Guidance's Musharaka
model."

                                          20
No. 75507-2-1/21

Hussain also assisted Guidance's former employees solicit other categories of

Guidance customers, such as those listed as withdrawn, declined, and pipeline.

Hussain testified,

      Q.     . . . In looking at Exhibit 34, is this your recollection? Mr.
             Mangrio reported back to you that he had send his emails [sic]
             to his closed customers, right?

      A.      Correct.

       Q.    And then he asks you to start drafting an email [sic] so he can
             start emailing [sic] pipeline and different groups, right?

       A.     Correct.

       Q.    And these pipeline and different groups, we're talking about
             the groups that are in the book of business file, right?

       A.     Yeah. Anwer [Mangrio] has in his -- whatever list he has. . . .

                     Like I said, I mean everybody did their own marketing.
              I'm just helping him draft a general letter about the company,
              and he has moved from Guidance to UIF.

       Q.    Okay. But here, at least, he's asking you to create an email
             [sic]for pipeline, and you tell him you'll work on it today, right?

       A.     Correct.

       Q.     And then later still, your group asks you or you create for them
              another type of email [sic] to go out to withdrawn and declined
              customers, right?

       A.     Correct.

       Q.     And, again, you tell them that these letters have to go out
              ASAP [(as soon as possible)], right?

       A.     Correct.

                                            21
No. 75507-2-1/22

       The evidence also clearly established that the former employees used

Guidance's customer information at UIF to generate business for UlF.7 For

instance, former employee Mangrio testified,
       Q.     And so you would agree with me, then, that you're providing
              Ms. Ahmad with your book of business from Guidance to use
              to contact customers to generate business for UIF?
       A.     Yes . . . .
       Q.     And, Mr. Mangrio, you closed a number of mortgages at UIF
              relating to the individuals whose contact information you sent
              to Ms. Ahmad, correct?
       A.     Yes.

       Substantial evidence allowed the jury to find that Guidance's former

employees misappropriated Guidance's trade secrets and used them to solicit

customers while at UIF.

       3. Substantial Evidence of Damages

       Mangrio argues that Guidance failed to provide substantial evidence of lost

profits caused by misuse of trade secrets, and failed to provide a reasonable

method to calculate the amount of such damages. A plaintiff may recover lost

profits if the evidence establishes the damages with reasonable certainty. Eagle

Group, Inc. v. Pullen, 114 Wash. App. 409, 418, 58 P.3d 292(2002). The reliability

of such evidence is for the trier of fact to determine. Id. at 419.

       7 Former employee Hussain testified that he had an intern at UIF, Smayyah
Baig, make lists of the contacts he retained from Guidance lists, so that he could
send out blast e-mails with special offers from UIF.

                                            22
No. 75507-2-1/23

       Both parties presented testimony as to their theories of proper damages.

Guidance presented lost profits and unjust enrichment8 theories of damages. The

lost profit calculation was the number of client transactions lost times the average

profit per transaction. Guidance provided testimony that between 170 (Zehl) and

174(Viswanadhan Kumar) of Guidance's customers listed in the misappropriated

Books of Business completed transactions with UIF in 2011-2013. Mangrio's

expert, Todd Menenberg, testified that lost profits for Guidance could be attributed

to as few as 18 or 22 transactions. Kumar testified for Guidance that, on average,

each contract for Guidance produces $10,477. Harold Martin, for Guidance,

testified that lost profits for Guidance on each lost contract was $11,147. On the

other hand, Mangrio testified that Guidance made approximately $10,000 per

transaction. Menenberg provided expert testimony that lost profits per customer

transaction was $10,600. Kumar asserted that retention rates were historically 68

percent. This is the number of customers who would be expected to refinance with

Guidance within five years. Menenberg testified that number was inflated by 56 to

64 percent (making it roughly only 24-31 percent). Guidance's former chief

financial officer and chief credit officer, Nicholson Minardi, testified that by 2013

the retention rate was at 47.24 percent.

      8 The jury did not award unjust enrichment damages, and this is not
appealed.

                                           23
No. 75507-2-1/24

      The method of determining damages was reasonable. The evidence

presented allowed the jury to apply that method. The jury is free to accept or reject

the evidence provided, so long as the verdict is within the range of the evidence.

See Nowociroski, 88 Wash. App. at 359. It appears the jury awarded lost profits to

Guidance for 80 customer transactions, accepting Mangrio's expert's testimony of

$10,600 per lost transaction.9 The jury award of $848,000 is within the range of

evidence provided.

      4. Conclusion

       While Mangrio refutes Guidance's trade secret claims, the Books of

Business retained by the former employees when they left Guidance were trade

secrets.   The former employees misappropriated this information to solicit

Guidance's customers. There was substantial evidence before the jury that this

misappropriation caused Guidance to suffer lost profits, and the jury appropriately

awarded damages within the range of evidence provided. We conclude that the

trial court properly denied Mangrio's motion for judgment as a matter of law as to

Guidance's trade secret claims.

       B. Attorney Fees on Trade Secret Claims

       Mangrio claims that the trial court erred when it awarded Guidance attorney

fees for prevailing on its claims under the UTSA.

       9 The record does not reveal the jury's computation. Whether coincidence
or not, 170 clients times 47.24 percent retention rate rounds to 80 customers.

                                            24
No. 75507-2-1/25

       Since Guidance prevailed on its trade secret claims, the trial court is entitled

to award attorney fees under the UTSA. RCW 19.108.040. The trial court awarded

Guidance attorney fees using the lodestar methodology. It determined the hours

Guidance's counsel claimed and the hourly rates charged by Guidance's counsel

were reasonable. The trial court excluded work on unsuccessful claims.

       The trial court did not abuse its discretion in making this award of fees.

       C. Order Granting Motion to Seal Trial Exhibits

       Mangrio argues that the trial court erred in granting Guidance's motions to

seal trial exhibits. He argues that Guidance waived any right to request to seal the

information after it displayed the information in open court. Additionally, he argues

that the court did not find that the unsealed information represented a serious and

imminent threat to an important interest.

       A court record may be sealed if a court enters written findings that the

specific sealing or redaction is justified by identified compelling privacy or safety

concerns that outweigh the public interest in access to the court record. GR

15(c)(2). A trial court's decision to a seal a court record is reviewed for abuse of

discretion. Hundtofte v. Encarnacion, 181 Wash. 2d 1, 6, 330 P.3d 168 (2014). A

trial court abuses its discretion when its decision is manifestly unreasonable or

exercised on untenable grounds. Id.

       A court must analyze a motion to seal using the five-step approach outlined

in Seattle Times Co. v. lshikawa, 97 Wash. 2d 30, 37-39, 640 P.2d 716 (1982).

                                            25
No. 75507-2-1/26

Hundofte, 181 Wash. 2d at 7. First, the party seeking to seal court records must show

a serious and imminent threat to some important interest, if not to protect a right to

a fair trial. Id. at 8. Second, anyone present when the motion is made must be

given an opportunity to object. Id. Third, the court must determine whether the

requested method is the least restrictive means available and effective in

protecting the interests threatened.      Id.    Fourth, the court must weigh the

competing interests of the party and the public, and it must consider alternative

methods to protect the interest. Id. Fifth, the order must not be broader than

necessary to protect the interest. Id.

       Mangrio challenges only one Ishikawa factor in this case, that the party

requesting to seal records must show a serious and imminent threat to some

important interest. The court granted sealingl° of trial exhibits that contained

nonparty consumer e-mail addresses, credit scores, and/or household incomes

and liabilities in circumstances where the information was tied to an identifiable

         10 Initially, the court sealed exhibits that contained restricted personal
identifiers, i.e., Social Security numbers and telephone numbers. Upon
reconsideration, the trial court expanded its initial sealing order, sealing exhibits
containing e-mail addresses, credit scores, and/or household incomes and
liabilities, until presentation of documents with the specific information redacted.
When asked for clarification at the first hearing regarding sealing, the court stated,
"The unredacted documents will remain in the court record sealed... so the public
can't look at them. The redacted documents will remain in the court record ... to
be seen . . . with references to the ones that they can't see." The record does not
indicate whether any party presented copies with redactions. The record that
reached this court did not have redactions. Mangrio's brief regards the court's
action as sealing.           Guidance's brief refers to redaction and sealing
interchangeably. We treat this issue as if the exhibits remain sealed.

                                            26
No. 75507-2-1/27

individual within a document. The trial court found that this was appropriate and

warranted because

       important public policy reasons support keeping the requested
       materials out of the public view, including an interest in protecting
       consumer privacy and an interest in maintaining public trust in the
       safety and security of information provided to financial institutions in
       connection with contemplated transactions.

The court's written findings satisfy the first Ishikawa factor, a serious and imminent

threat to some important interest.

       Citing Woo v. Fireman's Fund Insurance Co., 137 Wash. App. 480, 154 P.3d

236(2007), Mangrio argues that Guidance waived its right to restrict the future use

of information when it displayed it in open court. In Woo, this court found that the

information the party wanted to seal, insurance company manuals that had been

used as exhibits at trial, did not qualify as trade secrets. Id. at 492. It also noted

that Fireman's Fund did not make reasonable efforts to maintain their secrecy, as

it did not move to seal the exhibits until two years after they had been used at trial.

Id. at 491. Because the manuals were not trade secrets, and Fireman's Fund did

not present a compelling interest to seal the information, the court found that the

trial court abused its discretion in granting the request to seal them. Id. at 493.

       Woo is distinguishable because the records in that case were not trade

secrets, whereas here there was a finding that the customer lists were trade

secrets. The UTSA specifically provides for sealing trade secrets used in the

action. RCW 19.108.050. Moreover, the trial court sealed the trial exhibits with

                                            27
No. 75507-2-1/28

private consumer information because it found a compelling interest in protecting

consumer privacy and maintaining public trust in the safety and security of

information provided to financial institutions. Further, in Woo, this court found that

Fireman's Fund did not make reasonable efforts to maintain the exhibits' secrecy,

as it waited two years after trial to move the court to seal. Here, there was a

hearing on the sealing of exhibits within a month and a half of the trial verdict. This

delay was not unreasonable. Thus, the reasoning in Woo does not require the trial

court to find that a party waived confidentiality, either from using the information in

open court or from making a motion posttrial to redact or seal.

       The court did not abuse its discretion in redacting and sealing consumers'

private information in trial exhibits after the trial.

 II.   Guidance's claims

       Guidance argues the trial court abused its discretion in declining to award

exemplary damages. Second, Guidance argues the trial court erred in its method

of calculating attorney fees awarded to Mangrio for prevailing on breach of contract

claims. Third, Guidance argues that it is entitled to attorney fees for prevailing on

appeal.

   A. Exemplary Damapes

       Guidance appeals the trial court's decision not to award exemplary

damages under the UTSA. Under the Act, if willful and malicious misappropriation

                                               28
No. 75507-2-1/29

exists, a trial court may award exemplary damages in an amount not exceeding

twice any award of damages recovered for actual loss. RCW 19.108.030(2).

       A trial court's decision to award exemplary damages and fees under the

UTSA is discretionary and we will not reverse the amount unless the trial court

decision is clearly erroneous. Boeing Co. v. Sierracin Corp., 108 Wash. 2d 38, 61-

62, 738 P.2d 665 (1987). Guidance argues that because the jury found Mangrio's

actions willful and malicious, the trial court abused its discretion in failing to award

exemplary damages.

       Guidance first points to Boeing. In Boeing, the court affirmed the award of

exemplary damages because the record showed that Boeing knew its actions were

of "dubious legality," and it engaged in an effort to disguise its misappropriation.

Id. at 62. Guidance also cites to Eagle Group. In Eagle Group, the court affirmed

the award of exemplary damages after the jury found the defendants acted willfully

in their misappropriation. 114 Wash. App. at 423-24. There, a former employee of

Eagle Group took employees, clients, and files to another general contracting firm.

Id. at 412.

       Mangrio relies on Nowogroski, in which this court affirmed the denial of

exemplary damages on successful trade secret claims under the UTSA. 88 Wn.

App. at 360. However, Nowogroski contains no discussion of the record on which

the trial court made its determination to deny exemplary damages. Id. It merely

                                             29
No. 75507-2-1/30

indicates that Nowogroski had not shown the decision was clearly erroneous. Id.

It does not direct a result in this case.

       The trial court's findings, as well as the record, indicate that Guidance is

entitled to seek exemplary damages under the UTSA. RCW 19.108.030(2). The

jury found that Mangrio acted willfully and maliciously. The court noted that the

actions were "calculated and deliberate" in misappropriating Guidance's trade

secrets. This language can be found in a case to which the Boeing court cites,

Sperry Rand Corp. v. A-T-0, Inc., 447 F.2d 1387 (4th Cir. 1971). Boeing, 108
Wash. 2d at 62. In Sperry Rand, the court upheld exemplary damages because the

record showed the defendants' actions were " 'calculated,' deliberate,' and

'reprehensible.'"     Id. at 1394-95.       Given the jury's finding, here, that the

misappropriation was "willful and malicious," as well as the court's finding that the

actions were "calculated and deliberate," exemplary damages are proper.

       In its judgment denying exemplary damages, the trial court made the

following findings:

       1. The jury found that the defendants each acted willfully and
          maliciously in misappropriating the plaintiff's trade secrets;

       2. The defendants' actions in misappropriating the plaintiff's trade
          secrets was calculated and deliberate.

       3. Considering all the facts and circumstances, including the
          plaintiff's modest success, exemplary damages are not
          warranted.
       The trial court's third finding is apparently the basis for denial of exemplary

damages: "Considering all the facts and circumstances, including the plaintiff's

                                              30
No. 75507-2-1/31

modest success, exemplary damages are not warranted." It is unclear from the

record whether the trial court limited its consideration of facts and circumstance to

those of the trade secrets claim, rather than the totality of the litigation, in finding

that Guidance had "modest success." For instance, the fact that Guidance did not

prevail on its contract claims is not a proper consideration as to exemplary

damages.11     Nor is the fact that Guidance's recovery for lost profits was not

accompanied by an additional award for unjust enrichment. It is not the amount of

recovery that triggers the eligibility for exemplary damages, it is the finding of willful

and malicious conduct that triggers it, regardless of the size of the recovery for

actual or enrichment damages. Excluding consideration of the contract claims and

alternative damages theory, it is not clear factually why the trial court regarded the

award for $848,000 in actual damages as "modest success".

       An award of exemplary damages12 is not mandatory under the UTSA when

a finding of willful and malicious conduct is made. RCW 19.108.030(2). The

purposes of awarding punitive, or exemplary, damages are to punish the person

doing the wrongful act and to deter him and others like him from similar conduct in

the future. RESTATEMENT (SECOND) OF TORTS § 908(1) & comment a (Am. LAW

INSTITUTE 1979). Here, the trial court's order contains no discussion of deterrence

       11 RCW 19.108.030 makes no mention of contract claims, but ties exemplary
damages to willful and malicious misappropriation. If willful and malicious
misappropriation exists, the court may award exemplary damages in an amount
not exceeding twice any award for actual loss caused by the misappropriation. Id.
       12 The term, "exemplary damages," is interchangeable with "punitive
damages." Black's Law Dictionary 472, 474, 692(10th ed. 2014).

                                              31
No. 75507-2-1/32

or punishment. On this record, we cannot determine that the trial court's decision

was not clearly erroneous.

       We vacate the trial court's decision declining to award exemplary damages

and remand for reconsideration of this issue.

   B. Attorney Fees under Breach of Contract Claims

       Guidance argues that the trial court erred in calculating the award of

attorney fees to Mangrio for prevailing on Guidance's breach of contract claims.

First, it argues that, under the Guidance employee contracts, Virginia law must

govern the court's method of determining attorney fees.13 Second, it argues that

the trial court should have limited its award to the amounts actually incurred by the

defendants on the breach of contract claims, pursuant to the contracts.14 Guidance

asserts that the trial court erroneously calculated defendants' attorney fees using

the reasonable hourly rate put forth by Guidance, instead of the actual fees

incurred. Mangrio asserts that Washington law governs the correct method of

determining attorney fees on the breach of noncompete contract claims.

       13 The agreement between Guidance and its former employees states, in
pertinent part, "This Agreement shall be construed in accordance with, and all
actions arising under or in connection therewith shall be governed by, the internal
laws of the Commonwealth of Virginia (without reference to conflict of law
principles)."
       14 Under "Attorneys' Fees," the contract states, "Should either 1 or the
company.. . resort to legal proceedings to enforce this Agreement, the prevailing
party in such legal proceeding shall be awarded, in addition to such other relief as
may be granted, attorneys' fees and costs incurred in connection with such
proceeding."

                                           32
No. 75507-2-1/33

       This court reviews a trial court's determination of the amount of fees

awarded to a party legally entitled to such fees for abuse of discretion. Tradewell

Grp., Inc. v. Mavis, 71 Wash. App. 120, 127, 857 P.2d 1053(1993). There must be

an actual conflict between the laws of Washington and the laws of another state

before Washington courts will engage in a conflict of laws analysis. Freestone

Capital Partners LP v. MKA Real Estate Opportunity Fund I, LLC, 155 Wn. APP.

643, 664, 230 P.3d 625 (2010).

       Guidance and Mangrio agreed at the trial court level that Virginia law

governed the breach of contract claims. The trial court granted the defendants'

motion for summary judgment, finding that the noncompete clauses were void as

a matter of controlling Virginia law.

       In Virginia law, there is a distinction between contracts that provide for

reasonable attorney fees and attorney fees incurred. The use of the term

"incurred" in the contract is a clear expression of the parties' intent to limit attorney

fees to those actually incurred by the prevailing party. Safrin v, Travaini Pumps

USA Inc., 269 Va. 412, 419, 611 S.E.2d 352 (2005). Federal district courts have

also interpreted Virginia law in this manner. See Airlines Reporting Corp. v.

Sarrion Travel, Inc., 846 F. Supp. 2d 533, 539 (E.D. Va. 2012). There, the court

found that when a contract states that a party is liable for attorney fees and costs

actually incurred, it ensures that the fees subject to recovery are limited to those

fees actually incurred, or will be incurred for that specific purpose. Id. In that case,

                                              33
No. 75507-2-1/34

the court awarded attorney fees using the rate for the time actually expended. Id.

at 540. And, because judgment had not been collected, it doubled the award in

expectation of necessary future legal services. Id. at 540-41.

       In Washington, when a contract includes an attorney fee provision, it is the

terms of the contract to which the trial court should look to determine if such an

award is warranted. Kaintz v. PLG, Inc., 147 Wash. App. 782, 790, 197 P.3d 710

(2008). Washington also heeds the method set forth in the contract to determine

the award of attorney fees, only turning to the lodestar method in its absence.

Crest Inc. v. Costco Wholesale Corp, 128 Wn. App 760,773, 115 P.3d 349(2005).

Thus, we are not faced with an actual conflict of law. We look to the plain language

of the terms in the attorney fees provision in the contract.

       Here, the court awarded Mangrio attorney fees for actual hours spent on

the breach of contract claims on which they prevailed. Instead of using the hourly

rates customarily charged by Mangrio's counsel, the court used the hourly rates

charged by Guidance's counsel. Therefore, the amount awarded, $182,135.25,

does not reflect the fees actually incurred by Mangrio.

       We reverse the award of fees, and remand to the trial court to determine an

award of attorney fees for Mangrio that reflects the fees actually incurred in

litigating the breach of contract claims.

                                            34
No. 75507-2-1/35

   C. Attorney Fees on Appeal

      All parties request attorney fees associated with this appeal. Pursuant to

RAP 18.1, this court may award attorney fees requested by the party prevailing on

an issue. This court awards attorney fees to the prevailing party on the basis of a

private agreement, a statute, or a recognized ground of equity. Buck Mountain

Owner's Ass'n v. Prestwich, 174 Wash. App. 702, 731, 308 P.3d 644 (2013).

Guidance has prevailed on appeal and is entitle to reasonable attorney fees and

costs, subject to compliance with RAP 18.1.

WE CONCUR:

                                           35