Court Opinion

ID: 1084827
Source: CourtListenerOpinion
Date Created: 2013-10-09 22:26:59.894173+00
Date Added: 2024-06-11T09:20:01.219265
License: Public Domain

Filed 10/9/13 S.O.Tech/Special Ops. Technologies v. Berge CA2/7
                  NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.

              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                     SECOND APPELLATE DISTRICT

                                                DIVISION SEVEN

S.O. TECH/SPECIAL OPERATIONS                                         B243795
TECHNOLOGIES, INC.,
                                                                     (Los Angeles County
         Plaintiff and Appellant,                                    Super. Ct. No. BC437331)

         v.

MICHAEL BERGE et al.,

         Defendants and Respondents.

         APPEAL from an order of the Superior Court of Los Angeles County, Kenneth R.
Freeman, Judge. Reversed.
         Lurie, Zepeda, Schmalz & Hogan, Troy L. Martin and M. Damien Holcomb for
Plaintiff and Appellant.
         Law Office of Matthew K. Davis and Matthew K. Davis for Defendants and
Respondents.

                                       __________________________
       In this action under the California Uniform Trade Secrets Act, appellant S.O.
Tech/Special Operations Technologies, Inc. challenges the denial of its attorney’s fees.
Because we conclude that the trial court erred in concluding that the jury’s failure to find
a basis for awarding punitive damages precluded an award of attorney’s fees under the
California Uniform Trade Secrets Act, we reverse and remand for further proceedings.

                   FACTURAL AND PROCEDURAL BACKGROUND

       S.O. Tech/Special Operations Technologies, Inc. (S.O. Tech.) sued Michael
Berge, doing business as Berge Innovations, Berge Innovations, Inc., Action Bag and
Cover, Inc., and Does 1-25 on May 7, 2010, alleging misappropriation of trade secrets,
unfair competition, interference with prospective economic advantage, and breach of
contract; the complaint also request an accounting. Berge and Berge Innovations, Inc.,
respondents here, answered the complaint on June 7, 2010. The matter was tried to the
jury and, on October 6, 2011, the jury returned its verdict, finding a misappropriation of
trade secrets, and awarding S.O. Tech damages in the sum of $29,036. The jury also
found that S.O. Tech had failed to prove, by clear and convincing evidence, that the
respondents acted willfully and maliciously in the misappropriation. Finally, the jury
found that Berge had breached his contract, and awarded S.O. Tech damages of $29,820
for that breach.
       Following the verdict, the trial court took further evidence and heard arguments of
counsel on S.O. Tech’s demand for a permanent injunction. On January 17, 2012, the
court found good cause to impose that injunction. The trial court entered judgment in the
matter on April 27, 2012, severing the cause of action for interference with prospective
economic advantage for a separate trial, and reserving jurisdiction over the claim for
attorney’s fees and costs.
       S.O. Tech moved for attorney’s fees under the California Uniform Trade Secrets
Act (Civ. Code, § 3426.4) on May 29, 2012. The motion asserted a right to fees based on
the jury’s finding of misappropriation, and evidence demonstrating that misappropriation
had been willful and malicious. Respondents opposed the motion, asserting that the

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jury’s verdict on punitive damages precluded such an award, and that the fees had not
been properly calculated. After S.O. Tech replied, the court denied the motion. S.O.
Tech timely appealed.

                                      DISCUSSION

       The sole issue presented by this appeal is the trial court’s denial of an award of
attorney’s fees. The court determined that, although the question of attorney’s fees was
not before the jury, the jury’s determination on punitive damages bound the court, and
that it had no discretion to award attorney’s fees. Because we conclude that the jury’s
finding on the different issue did not bind the court, we will remand for the court to
reconsider the motion.

       Standard of Review
       “‘On review of an award of attorney fees after trial, the normal standard of review
is abuse of discretion. However, de novo review of such a trial court order is warranted
where the determination of whether the criteria for an award of attorney fees and costs in
this context have been satisfied amounts to statutory construction and a question of law.’”
(Connerly v. State Personnel Bd. (2006) 37 Cal.4th 1169, 1175, quoting Carver v.
Chevron U.S.A., Inc. (2002) 97 Cal.App.4th 132, 142.) Thus, we exercise independent
review on the narrow question of whether S.O. Tech is entitled to seek fees under Civil
Code section 3426.4.

       California Uniform Trade Secrets Act
       S.O. Tech’s claims for misappropriation were brought under the California
Uniform Trade Secrets Act (CUTSA), Civil Code sections 3426 to 3426.11.1 Section
3426.4, at issue here, provides: “If a claim of misappropriation is made in bad faith, a
motion to terminate an injunction is made or resisted in bad faith, or willful and malicious

1      All further references, unless otherwise noted, are to the Civil Code.

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misappropriation exists, the court may award reasonable attorney’s fees to the prevailing
party.” To justify a fee award under this statute, the trial court must find that the party to
whom fees are awarded is the prevailing party and that a willful and malicious
misappropriation occurred. (Vacco Industries, Inc. v. Van Den Berg (1992) 5
Cal.App.4th 34, 54-55, fn. 23 (Vacco).)
       CUTSA, adopted from the Uniform Trade Secrets Act, does not define the burden
of proof to be applied on a motion for attorneys’ fees under section 3426.4. As a result,
we look to the Evidence Code, which mandates the application of a preponderance of the
evidence standard: “Except as otherwise provided by law, the burden of proof requires
proof by a preponderance of the evidence.” (Evid. Code, § 115; Conservatorship of
Wendland (2001) 26 Cal.4th 519, 546. [“The default standard of proof in civil cases is
the preponderance of the evidence”].)
       While there was a jury finding in this case, that finding, without objection by the
parties, required only that the jury determine whether there was clear and convincing
evidence sufficient to award punitive damages. Early in the proceedings, respondents
sought a ruling from the court applying that standard of proof to the question of punitive
damages. In that request, respondents neither suggested, nor asked the court to rule, that
the same burden of proof should be applied to the court’s exercise of its discretion in
determining whether to award attorney’s fees.
       In the discussion of the jury instructions themselves, the record does not
demonstrate that any party asserted that the jury’s finding on punitive damages would be
binding on the issue of attorney’s fees. The record does indicate that the parties and the
court conducted an off the record discussion of jury instructions. After that discussion,
the court issued a minute order memorializing its rulings. Two portions of that order are
relevant. First, the court ruled that the verdict form for punitive damages would be
phrased in terms of the clear and convincing evidence standard. Second, the court
determined that in giving CACI No. 1441, the punitive damages instruction, the same
clear and convincing language would be included.

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          Respondents have identified no legal basis to argue that the jury’s finding would
be binding on the determination on attorney’s fees, a determination to be made by the
court. Respondents have also cited no case in which the clear and convincing standard
was applied to the award of attorney’s fees under CUTSA.2
          The trial court, in denying the request for attorney’s fees, relied on Vacco. In that
case, the jury awarded punitive damages for misappropriation. In considering the
propriety of the award of attorney’s fees, and in response to the defendants’ arguments
that there was no statutory basis for the award, the Court of Appeal stated: “In order to
justify fees under Civil Code section 3426.4, the court must find that a ‘willful and
malicious misappropriation’ occurred. That requirement is satisfied, in our view, by the
jury’s determination, upon clear and convincing evidence, that defendants’ acts of
misappropriation were done with malice. This finding was necessary to the award of
punitive damages which was made by the jury. However, it is also sufficient to justify
the statutory portion of the fee award.” (Vacco, supra, 5 Cal.App.4th at p. 54, fn.
omitted; see also Khavarian Enterprises, Inc. v. Commline, Inc. (2013) 216 Cal.App.4th
310, 326-327 [trial court properly decides attorney’s fee issue].)
          Defendants in Vacco also argued that the issue of attorney’s fees was a jury issue.
The court rejected that argument, explaining that Code of Civil Procedure section 1033.5
places that issue in the hands of the court, not the jury. (Vacco, supra, 5 Cal.App.4th at
p. 55.)
          What was not before the court in Vacco, however, is the issue for which
respondents and the trial court cited that case: whether the trial court is bound in its
determination of attorney’s fees by the jury’s finding on punitive damages. The trial
court here concluded that: “The implication under Vacco is that if the jury finds that the
plaintiff does not demonstrate willful and malicious appropriation, fees are not justified
under CUTSA.” The court further concluded that it was bound by the jury’s

2      Respondents, in briefing the issue before this Court, still provide no authority for
their position other than Vacco, relied on by the trial court.

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determination, relying on Hoopes v. Dolan (2008) 168 Cal.App.4th 146.3 The court
erred.
         The Vacco court did not have before it the issue of what the standard of proof was
because, in the face of a determination that there was clear and convincing evidence of
malice, it was clear that there was a showing of the necessary facts by a preponderance of
the evidence. While the court determined that the jury’s finding was sufficient for the
court to award attorney’s fees under the statute, nothing in the facts before the court or
the language of the statute indicates it was necessary. To the contrary, Evidence Code
section 115 demonstrates it was not.
         Here, the standards of proof were different, the jury’s findings concerning malice
and oppression for purposes of punitive damages were not binding on the trial court’s
determination of S.O. Tech’s motion for attorney fees.4

3      In Hoopes, while the court did hold that the trial court could not disregard the
jury’s verdict in deciding issues based on the same evidence and same operative facts, it
also held, as relevant here, that when the issues to be decided are both within the province
of the court, and concern factual and legal issues undecided by the jury, the court has a
duty to make the determination. (Hoopes v. Dolan, supra, 168 Cal.App.4th at pp. 150,
162-163.) Here, the jury did not decide whether the plaintiff had demonstrated willful
and malicious misappropriation by a preponderance of the evidence, but only that there
was not clear and convincing evidence of such misappropriation.

4      Because we remand for the trial court to consider whether there is a basis for the
requested attorney’s fees, we need not reach the other issues raised by respondents.

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                                         DISPOSITION

       The order is reversed and the matter is remanded for the trial court to determine
whether the record demonstrates a basis for the award of attorney’s fees, and, if so, the
amount properly awarded. Appellant is to recover its costs on appeal.

                                          ZELON, J.
We concur:

       WOODS, Acting P. J.

       SEGAL, J.


        Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to
article VI, section 6 of the California Constitution.

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