Court Opinion

ID: 4659234
Source: CourtListenerOpinion
Date Created: 2021-02-10 20:02:33.874494+00
Date Added: 2024-06-11T08:01:58.171277
License: Public Domain

Filed 2/10/21 Performance Production Co. v. Virus Internat., Inc. CA4/3

                      NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication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

                IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                     FOURTH APPELLATE DISTRICT

                                                DIVISION THREE

 PERFORMANCE PRODUCTION
 COMPANY,
                                                                         G058667
      Plaintiff and Appellant,
                                                                         (Super. Ct. No. 30-2019-01051979)
           v.
                                                                         OPINION
 VIRUS INTERNATIONAL, INC. et al.,

      Defendants and Respondents.

                   Appeal from a judgment of the Superior Court of Orange County, Ronald
L. Bauer, Judge. Affirmed.
                   Vivoli Saccuzzo, Michael W. Vivoli and Jason P. Saccuzzo for Plaintiff
and Appellant.
              Severson & Werson, Jan T. Chilton and Kerry W. Franich for Defendants
and Respondents.
                                   *          *           *
              Daniel Diaz (Diaz), doing business as Performance Production Company
(PPC), sued Virus International Inc., Virus Tech, LLC and Russell Stone (collectively
Virus), alleging Virus violated the Unfair Competition Law (Bus. and Prof. Code,
§ 17200, et seq. (UCL).) by underreporting the value of its products for the purpose of
paying lower import tariffs. Virus successfully moved for summary judgment, arguing
that Diaz lacked standing to sue under the UCL because he failed to establish the fact that
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he sustained any financial losses attributable to its alleged tariff impropriety.
              Diaz argues the trial court erred in granting the motion because his
declaration filed in opposition to the motion contained sufficient evidence to establish
Virus cheated on its tariffs, and that the cheating initially prevented him from entering the
market to compete with Virus and later impaired his ability to sell his competing
products.
              We cannot agree. While the evidence Diaz provided was sufficient to
demonstrate Virus cheated on its tariffs—and presumably benefitted in some way from
that cheating—it was insufficient to establish a causal link between the cheating and the
disappointing performance of Diaz’s competing business. Diaz offered no evidence
suggesting that Virus had underpriced its products as a consequence of its misconduct,
thus giving it a competitive advantage in sales. To the contrary, Diaz himself alleges that
Virus may have simply pocketed the ill-gotten gains as excess profit. Such a practice
would qualify as a benefit to Virus, but would not harm its competitors, except in their

       1
              Virus admits that it engaged in some tariff impropriety, albeit without
acknowledging the specifics. This is irrelevant to our analysis, which focuses on whether
Diaz has offered sufficient evidence to raise a triable issue of fact on the question of
standing.

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capacities as members of the public who generally benefit from tax payments. As the
trial court found, this is not the kind of harm that supports standing under the UCL.
              Diaz provided no evidence from any customer even suggesting that the
customer would have purchased merchandise from Diaz, rather than Virus, had Virus not
cheated on its tariffs. Nor has Diaz provided other evidence which, if believed, would
establish that Virus’s misconduct caused him to suffer financially as a consequence of
Virus’s misconduct, as is required to prove standing under the UCL.
              The judgment is affirmed.

                                          FACTS
              Diaz, doing business as PPC, sells mixed martial arts (MMA) performance
clothing. Some years ago, he was the designer of some of the first performance MMA
“fight shorts,” which are now widely manufactured or distributed by several companies,
including some of the largest apparel companies in the world. Diaz previously worked as
a commissioned salesman for Russel Lin, one of the principals who formed Virus,
another company that sells MMA performance clothing.
              Through other litigation, the specifics of which are not part of our record,
Diaz learned that Lin had engaged in a practice of under-declaring the value of the goods
he imported for sale, in order to minimize his tariffs. Diaz believed Lin had continued
that same practice through Virus; Diaz was consequently discouraged for years from
entering the market and trying to compete with Virus. However, Diaz ultimately decided
to create PPC in September 2018, and he began selling MMA performance apparel
despite what he believed was Virus’s continuing illegal conduct.
              In February 2019, Diaz filed a complaint against Virus in the name of PPC.
The complaint seeks injunctive relief, attorney fees, and other just and appropriate relief,
based on Virus’s alleged violation of the UCL. The complaint alleges that Virus
“engaged in a scheme to avoid the tariffs [it was] legally obligated to pay” by “caus[ing]

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false customs documents to be presented or delivered to the United States Government
[that] were false or fraudulent because they deliberately under-stated the prices being
paid for the goods in question, specifically to avoid customs charges and/or duties owed
by [Virus] to the United States Government.”
              According to the complaint, Diaz was harmed in his effort to compete with
Virus because he “is competing lawfully in the market while [Virus and its principals]
continue to give themselves an unfair advantage that allows them to maintain much
higher profits, for example.” Diaz specifically alleged that PPC “has lost money or
property within the meaning of the UCL due to [Virus’s] conduct because it cannot
effectively compete and loses market share [due] to [Virus’s misconduct].”
              Virus took Diaz’s deposition in May 2019. As of that date, Diaz was
selling his goods directly to customers almost entirely online. He testified PPC sold
approximately $4,300 worth of goods between October 2018 and May 2019. By contrast,
Virus had approximately $17 million in sales from 2014 to 2019.
              At his deposition, Diaz acknowledged he could not identify any customers
he had lost to Virus, and stated he “would have no way of knowing” whether that had
happened. He also testified that he did not know whether he had lost any market share to
Virus, or whether he had lost any money as a result of Virus’s misconduct. Diaz
suggested that if he could review Virus’s business documents, he might be able to “weigh
what advantage that they were able to gain . . . .”
              Relying on Diaz’s deposition testimony, Virus moved for summary
judgment on the ground that Diaz lacked standing to maintain a cause of action against it
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under the UCL.

       2
               Virus also moved for summary judgment on the ground Diaz could not
demonstrate he was entitled to any remedy under the UCL, and Stone moved for
summary judgment on the additional ground that he engaged in no unfair business
practices in his individual capacity.

                                              4
              Diaz opposed the motion; he relied on his own declaration to demonstrate a
triable issue of fact on Virus’s claim that he “does not know of any sales lost to [Virus],
does not know whether he has lost any market share to [Virus], and is unaware of any
money lost a result of [Virus’s] purported actions.” In his declaration, Diaz stated that at
his deposition he “could not identify any specific sales that [he] lost” to Virus “without
seeing [its] business records.” However, since the deposition, he had “been afforded the
opportunity to review documents produced by [Virus], including documents reflecting
the amounts [Virus has] declared as the value of the goods [it] imported, and which [it]
then re-sold within the United States.” According to Diaz, the documents “make clear
that [Virus has], in fact, continued to under-declare the value of the goods [it]
imports[s],” which “make[s] it virtually impossible for companies like mine to compete,
since we accurately declare our values and pay our tariffs at the full price.” He stated the
documents also “make clear that, using the inflated profits earned by under-declaring the
values of their imported goods, [Virus has] unfairly enjoyed more marketing and better
advertising, leading to a larger market share than would have been possible without
engaging in these practices.”
              Diaz did not identify what documents he reviewed, nor did he detail exactly
how those documents supported his conclusions. With regard to his claim about Virus
enjoying more marketing and better advertising, Diaz did provide an example: “For
instance, [Virus was] able to secure a sponsorship with Daniel Cormier, a famous MMA
star, as a result of the unfair advantage obtained through their practice of under-declaring
the value of [its] goods.” Diaz did not point to any facts linking the Cormier sponsorship
to the funds Virus had saved on tariffs; he instead concluded, “[t]hose are the types of
marketing advantage[s] a company is able to realize using illegal practices like under-
declaring value to underpay tariffs on foreign imports.”
              Diaz also declared he “lost money as a result of [Virus’s] illegal conduct”
because he “was effectively kept out of the apparel industry due to my recognition there

                                              5
was no point trying to compete with [Virus] when [it was] illegally enjoying inflated
profits and increased market share as a result of [its] illegal conduct. During that time
period I was deprived of profits I otherwise could and would have earned by competing
in the apparel industry.” Moreover, “[s]ince entering the industry . . . , I have been
undercut by [Virus] as a result of [its] illegal practice of deliberately under-declaring [its]
customs duties . . . .” Diaz provided no evidence or analysis to support these contentions.
               Virus filed objections to Diaz’s declaration, asserting it lacked foundation,
was conclusory and speculative, and involved improper expert opinions.
               At the hearing, Virus claimed that in order to establish standing, Diaz was
required to demonstrate at least that “he has lost a single sale.” Diaz countered that it was
unnecessary for him to “calculate” damages by counting up lost sales. Instead, he
claimed it was sufficient for him to establish “some identifiable, even trifle of an injury”
which he could link to the difference between the tariff Virus was paying on a garment it
imported, and the tariff it should have been paying. He claimed “[y]ou can . . . just do it
by the number of shorts that they have sold.”
               The court granted the summary judgment motion, ruling that Diaz “was
unable to provide any admissible evidence demonstrating a concrete injury resulting from
[Virus’s] alleged conduct [and] therefore lacks standing to assert his claim for alleged
violations of [the UCL].” As the court stated at the hearing, “I just don’t think that there
is any evidence of whatever the defendant may have done that may have caused the
plaintiff an injury.”
               The court entered judgment in favor of Virus. Diaz appeals from that
ruling.

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                                      DISCUSSION
       1.     Summary Judgment Standards
              Any party to an action may move for summary judgment. (Code Civ. Proc.,
§ 437c, subd. (a); Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826 (Aguilar).) The
object of the summary judgment procedure is “to cut through the parties’ pleadings” to
determine whether trial is necessary to resolve their dispute. (Aguilar, at p. 843.)
              “A party may move for summary adjudication as to one or more causes of
action within an action, one or more affirmative defenses, one or more claims for
damages, or one or more issues of duty . . . .” (Code Civ. Proc., § 437c, subd. (f)(1).) “A
motion for summary adjudication may be made by itself or as an alternative to a motion
for summary judgment and shall proceed in all procedural respects as a motion for
summary judgment.” (Id., subd. (f)(2).)
              “[T]he party moving for summary judgment bears an initial burden of
production to make a prima facie showing of the nonexistence of any triable issue of
material fact.” (Aguilar, supra, 25 Cal.4th at p. 850.) “A prima facie showing is one that
is sufficient to support the position of the party in question.” (Id. at p. 851.) A defendant
moving for summary judgment may satisfy its initial burden either by producing evidence
of a complete defense or by showing the plaintiff’s inability to establish a required
element of the case. (Code Civ. Proc., § 437c, subd. (p)(2); Aguilar, at p. 853.)
              If a moving defendant makes the necessary initial showing, the burden of
production shifts to the plaintiff to make a prima facie showing of the existence of a
triable issue of material fact. (Code Civ. Proc., § 437c, subd. (p)(2); see Aguilar, supra,
25 Cal.4th at p. 850.) If the plaintiff opposing summary judgment presents evidence
demonstrating the existence of a disputed material fact, the motion must be denied. (Id.,
at p. 856.)
              In evaluating the summary judgment motion and opposition, the trial court
“must consider all of the evidence and all of the inferences drawn therefrom.” (Aguilar,

                                              7
supra, 25 Cal.4th at p. 856.) The moving party’s evidence is strictly construed, while the
opponent’s evidence is liberally construed. (Id. at p. 843.)
              On appeal, we review the summary judgment ruling on a de novo basis.
(Aguilar, supra, 25 Cal.4th at p. 860.) We consider all of the evidence submitted by the
moving and opposing parties, except that to which objections were made and sustained.
(Ibid.) “In undertaking our independent review of the evidence submitted, we apply the
same three-step analysis as the trial court.” (Bono v. Clark (2002) 103 Cal.App.4th 1409,
1431.) “First, we identify the issues framed by the pleadings. Next, we determine
whether the moving party has established facts justifying judgment in its favor. Finally,
if the moving party has carried its initial burden, we decide whether the opposing party
has demonstrated the existence of a triable, material fact issue.” (Id. at p. 1432.)
       2.     Standing for UCL Claim
              “The UCL prohibits, and provides civil remedies for, unfair competition,
which it defines as ‘any unlawful, unfair or fraudulent business act or practice.’
[Citation.] Its purpose ‘is to protect both consumers and competitors by promoting fair
competition in commercial markets for goods and services.’” (Kwikset Corp. v Superior
Court (2011) 51 Cal.4th 310, 320 (Kwikset).)
              However, “[w]hile the substantive reach of these statutes remains
expansive, the electorate has materially curtailed the universe of those who may enforce
their provisions. As we recently explained: ‘In 2004, the electorate substantially revised
the UCL’s standing requirement; where once private suits could be brought by “any
person acting for the interests of itself, its members or the general public” [citation], now
private standing is limited to any “person who has suffered injury in fact and has lost
money or property” as a result of unfair competition. [Citations.] The intent of this
change was to confine standing to those actually injured by a defendant’s business
practices and to curtail the prior practice of filing suits on behalf of ‘“clients who have
not used the defendant’s product or service, viewed the defendant’s advertising, or had

                                              8
any other business dealing with the defendant . . . .”’” (Kwikset, supra, 51 Cal.4th at
pp. 320-321.)
                “To satisfy the narrower standing requirements . . . , a party must now
(1) establish a loss or deprivation of money or property sufficient to qualify as injury in
fact, i.e., economic injury, and (2) show that that economic injury was the result of, i.e.,
caused by, the unfair business practice or false advertising that is the gravamen of the
claim.” (Kwikset, supra, 51 Cal.4th at p. 322; Californians for Disability Rights v.
Mervyn’s, LLC (2006) 39 Cal.4th 223, 228 [UCL plaintiff must demonstrate it ‘“has
suffered injury in fact and has lost money or property as a result of such unfair
competition”’]; Hall v. Time Inc. (2008) 158 Cal.App.4th 847, 854 [UCL standing is
satisfied when the plaintiff has “expended money due to the defendant’s acts of unfair
competition”].)
       3.       Diaz’s Evidence of Damages
                In his pleadings and at oral argument, Diaz appears to concede that his
deposition testimony provided insufficient evidence to create a triable issue of fact about
whether he sustained financial damage as a consequence of Virus’s underpayment of
tariffs. But he contends the declaration he submitted in opposition to the summary
judgment motion cured the deficiency.
                In his declaration, Diaz seemed to recognize that the problem with his
deposition testimony was his inability to identify any specific sales or market share that
PPC lost to Virus: “At my deposition in this case, l explained that without seeing
Defendants’ business records, I could not identify any specific sales that I lost to
Defendants (since I did not know who their customers were), nor could I fully determine
the extent of the market share that Defendants managed to secure through their illegal
business practice . . . . I have since been afforded the opportunity to review documents
produced by Defendants in this case.” Diaz’s declaration still failed to identify any sales
or market share that he had lost to Virus. Instead, as Virus points out, Diaz’s declaration

                                              9
offered only conclusory claims of damage, based on what appears to be speculation and
an assumption that anything which benefitted Virus’s business or increased its market
share, must necessarily have harmed PPC.
              In the absence of such evidence, we cannot assume PPC was damaged
merely because Virus prospered. Likewise, we cannot assume that any sale lost by Virus
would necessarily result in a sale gained by a competitor like PPC. As Diaz himself
pointed out in his declaration, the market for MMA performance wear is met by sellers
much larger than Virus and PPC. As he explained, the type of performance shorts he
originally designed were “now widely manufactured and/or distributed by other, larger
companies, including some of the largest apparel companies in the world.” Thus, we
cannot assume that if a purchaser were dissuaded from purchasing from Virus, but
nonetheless remained determined to own the type of performance wear it sells, he or she
would have purchased it from PPC rather than some other competitor.
              Even more fundamentally, Diaz has not pointed to any evidence
demonstrating that Virus actually gained any competitive advantage as a consequence of
its tariff violations—such as by selling its shorts for a lower price than it otherwise could
have—as opposed to maintaining the same price it would have charged had it paid the
proper tariffs and just taking its tariff savings as added profit. In fact, Diaz appears to
assume that is what Virus did, stating in his declaration that Virus’s “practice of
under-declaring the value of clothing imported into the United States . . . enable[d] them
to make larger profits than me.”
              Diaz theorizes the extra money allowed Virus to “enjoy[] more marketing
and better advertising, leading to a larger market share than would have been possible
without engaging in these practices.” And while it sounds like a practice that could
qualify as a competitive advantage—although not necessarily one that harmed Diaz—
there is no evidence that Virus spent more money on advertising than it would have

                                              10
absent its tariff underpayment, or that it increased its market share as a consequence of
such conduct. The theory is pure speculation.
              Diaz claims he was “effectively” prevented from entering the market for a
period of time because of Virus’s unfair tariff practices. But Diaz’s claim is belied by his
own admission the situation did not change when he later entered the market. That
admission demonstrates Diaz was not prevented from entering the market because of
Virus’s tariff practices; he chose not to.
              Diaz also asserts in his opening brief that he “lost money as a result of
[Virus’s] practice of under-declaring the value of the goods it imports” since he sold
goods “for smaller profits than Respondents because he truthfully disclosed the value of
his imports.” He made a similar claim during his deposition. But again, the fact that
Virus may be cheating by not paying all tariffs due does not demonstrate Diaz has
suffered any personal financial loss as a consequence.
              Diaz relies on Clayworth v. Pfizer, Inc. (2010) 49 Cal.4th 758 (Clayworth),
for the proposition that a plaintiff can establish standing under the UCL “even though the
plaintiff lost no money or property.” We think that is a misreading of Clayworth. In that
case, several retail pharmacies sued manufacturers of brand-name prescription drugs,
alleging that the manufacturers had unlawfully conspired to maintain prices for their
drugs in California at levels above those charged for the same or comparable products in
Canada. The defendants argued the plaintiffs lacked standing under the UCL because
they passed on the excess charges to their customers, and thus were not harmed by the
practice. The Supreme Court rejected the argument explaining that when the pharmacies
paid the excess charges, they suffered a financial loss sufficient to establish standing,
even if they later recouped that loss from the customer. (Id. at p. 789.)
              Diaz also relies on this court’s opinion in Law Offices of Mathew Higbee v.
Expungement Assistance Services (2013) 214 Cal.App.4th 544 (Higbee), as support for
the proposition that a competitor’s loss of market share caused by the defendant’s unfair

                                             11
competition is sufficient to confer standing under the UCL. We concur with that
proposition. But Higbee is a pleading case, not a summary judgment case. Thus, all that
was required in Higbee was for the plaintiff to allege that he had lost market share. He
had no obligation to offer any evidence in support of that allegation. Here Diaz could not
defeat summary judgment without offering evidence sufficient to prove that he had lost
market share, or suffered some other financial consequence, as a consequence of Virus’s
unfair tariff practices. It was not enough for him to simply assert it.
               Finally, Diaz relies on Kwikset to establish that standing requires no more
than an ‘“‘“identifiable trifle’ of injury.”’” (Kwikset, supra, 51 Cal.4th at p. 324.) But
even that trifling injury must be specifically identified. Diaz has not done that. As such,
he failed to raise a triable issue of fact on the question of standing. We consequently find
no error in the trial court’s summary judgment ruling.

                                      DISPOSITION
               The judgment is affirmed. Virus is to recover its costs on appeal.

                                                  GOETHALS, J.

WE CONCUR:

IKOLA, P. J.

THOMPSON, J.

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