Summary Judgment and Summary Adjudication,  Trade Secrets

Uniform Trade Secret Act preemption error results in reversal — and some lessons on review of orders granting summary adjudication

public domain image from Wikimedia Commons

I have a feeling that the plaintiff’s attorney in Angelica Textile Services, Inc. v. Park, case no. D062405 (4th Dist., October 15, 2013), didn’t lament too much the loss of a jury trial on the plaintiff’s claim for trade secret misappropriation, even though on the surface, it looked like plaintiff’s last gasp following the dismissal of plaintiff’s other claims for breach of contract, unfair competition, breach of fiduciary duty, interference with business relations, and conversion, all of which related to conduct that involved the alleged trade secrets. After all, plaintiff had an ace up his appellate sleeve.

The merits

The claims were all related to the conduct of the plaintiff laundry service’s former executive who, while still employed by plaintiff, entered into contracts with customers that — against standard industry practice — allowed cancellation at any time. The executive also collaborated with third parties in planning a competing laundry business. He then resigned from plaintiff, went to work as the chief executive of the competitor, signed up customers who were able to cancel their contracts with the plaintiff, and hired 40 employees away from the plaintiff.

The defendants obtained summary adjudication of the contract and business tort claims on the ground the those claims were preempted by the Uniform Trade Secrets Act. At the jury trial on the remaining claim for trade secret misapprpriation, the jury found that the information at issue did not constitute a trade secret and rendered a verdict for the defenedants. On appeal from the final judgment, plaintiff did not challenge the jury’s verdict. Instead, they argued that the summary adjudication had been improperly granted. The Court of Appeals reversed.

The Court of Appeal held that the claims were not preempted by the UTSA because plaintiff’s theories of liability made it irrelevant whether the information constituted trade secrets or not. The contract claim depended on a provision in the executive’s employment contract that prohibited competition while employed. The conversion claim was based on the executive’s taking of company documents that comprised company property (and could not be dismissed ion the ground that the physical documents were valueless because that issue had not been litigated). The remaining torts were based on the executive’s breach of his duty of loyalty.

The appellate lessons

The defendants tried to stymie the appeal through several procedural arguments.

First, the appellate court rejected the contention that plaintiff was required to seek writ review of the summary adjudication order, pointing out that “there is no requirement in our summary judgment statute that parties who wish to challenge orders granting summary adjudication do so by way of a writ petition.” (Note, however, that there is some authority — apparently in the minority — that orders denying summary adjudication may only be reviewed by writ petition and cannot be challenged on appeal from the final judgment. (See Sierra Craft, Inc. v. Magnum Enterprises, Inc. (1998) 64 Cal.App.4th 1252.))

Second, the court rejected the contention that plaintiff forfeited review of the summary adjudication ruling by not moving for reconsideration. The business contracts lawyers and the defendants contended in their respondents’ brief that the trial court’s error of law could have been raised in a motion for reconsideration — an odd contention, seeing as how it did not rely on new facts or law. In any event, the appellate court conclusively states that “there is no requirement that a losing party move for reconsideration of an order granting summary adjudication” in order to preserve arguments for appeal that are already in the record.