Case Name: SAE Materials, Inc. v. Maldonado, et al.
Case No.: 17CV306257

Plaintiff/cross-defendant SAE Materials, Inc. (“Plaintiff” or “SAE”) moves for summary adjudication as to the first, third, eighth and ninth causes of action of its Second Amended Complaint against defendant/cross-complainant Richard Maldonado (“Richard”).

After full consideration of the evidence, separate statements and authorities submitted by the parties, the Court makes the following rulings:

SAE’s request for judicial notice is GRANTED. (Evid. Code, § 452, subd. (d).) The Court notes that judicial notice is limited to the existence of these items and not the truth of their contents. (See Fremont Indem. Co. v. Fremont Gen. Corp. (2007) 148 Cal.App.4th 97, 113.)

SAE’s motion for summary adjudication is DENIED.

As an initial matter, the Court disagrees, in part, with Richard’s assertion that SAE’s motion is procedurally improper because there is a difference between the element of damages and the element of injury/harm. Where the necessary element of the particular cause of action is the latter rather than the former, the plaintiff need not establish harm or injury in terms of a numerical amount because that question involves the remedy for the harm, which is not part of a cause of action. (See People ex rel. Feuer v. Superior Court (2015) 234 Cal.App.4th 1360, 1378.) No breach of contract claim is at issue in this motion like in Paramount Petroleum Corp. v. Superior Court (2014) 227 Cal.App.4th 226, the authority on which Richard relies, and not all of the four causes of action that SAE seeks to summarily adjudicate in its favor and against Richard have damages as an element rather than harm/injury, contrary to Richard’s assertions. Damages are an essential element of a claim for breach of fiduciary duty, and therefore SAE is required to establish as a matter of law the amount of damages to which it is entitled as a result of defendants’ conduct. (See, e.g., Jameson v. Desta (2015) 194 Cal.Rptr.3d 152, citing Paramount Petroleum, 227 Cal.App.4th at 242 [judgment reversed on other grounds].) The same cannot be said for claims for intentional interference with economic advantage (see Roy Allan Slurry Seal, Inc. v. American Asphalt South, Inc. (2017) 2 Cal.5th 505, 512 [necessary element is “economic harm proximately caused by the defendant’s actions]), inducing breach of contract (see Freed v. Manchester Service, Inc. (1958) 165 Cal.App.2d 186, 189 [necessary element is that valid contract was breached “resulting in injury to plaintiff”], and negligent interference with economic advantage (see Venhaus v. Shultz (2007) 155 Cal.App.4th 1072, 1077-1078 [necessary element is that plaintiff was harmed by the defendant’s negligent interference].) Thus, with respect to three out of the four claims at issue in this motion (and assuming all of the other elements have been demonstrated), SAE need only establish that it was harmed/injured by Richard’s conduct in order to meet its initial burden, and not demonstrate the numerical amount of damages incurred.

With respect to the first cause of action for breach of fiduciary duty, the Court finds that SAE has failed to submit admissible evidence which establish the necessary elements of this claim.

SAE asserts that Richard violated his fiduciary duty of loyalty because he acted against its interest and completely in support of his own in forming a company that directly competes against SAE. SAE purports to submit evidence that Richard registered the dba for Meritronics Materials in 2016, while he was working for SAE, and then incorporate the entity thereafter, both as Meritronics Materials, LLC and Meritronics Materials, Inc., a company which competed directly with SAE. (UMF No. 7.) This evidence consists of a pleading filed in another civil action in this court in September 2017 entitled Meritronics Materials, Inc. v. HiQ Solar, Inc., Case No. 17CV315403. Generally, facts alleged in pleadings in a prior civil action may be admissible evidence against the pleader in the present action. (See, e.g., Magnolia Square Homeowner Assn. v. Safeco Ins. Co. (1990) 221 Cal.App.3d 1049, 1061.) But this is not the situation here, as Richard is not the pleader in the complaint currently at issue before the court. Therefore, none of the factual “admissions” in the Meritronics action can be utilized against Richard as admissible evidence here.

SAE additionally submits Richard’s response to a request for admission, where he admitted that HiQ Solar (“HiQ”) was a customer of SAE in 2016. But none of the other materials submitted by SAE that it cites to in its separate statement establish that HiQ began doing business with Richard after his employment with SAE was terminated. SAE relies on the pleadings in the Meritronics which, as stated above, cannot be used against Richard here, as well as discovery responses by HiQ in an action filed against it by SAE in this court entitled SAE Materials, Inc. v. HiQ Solar, Inc., Case No. 17CV317105, as well as portions of the deposition testimony of former employees of SAE. The discovery responses, particularly the responses to interrogatories, are problematic because, as Richard points out in his opposition papers, an answer to an interrogatory can only be used against the responding party, i.e., the party who gave the answer. (Code Civ. Proc., § 2030.410.) As to all other parties, the answers are inadmissible hearsay. (See Castaline v. City of Los Angeles (1975) 47 Cal.App.3d 580, 587-588.) Here, Richard was not the responding party, HiQ was. Consequently, HiQ’s interrogatory responses are inadmissible hearsay and cannot be used to establish the company’s relationship with Meritronics. As for the deposition testimony, particularly that of Mariano Salazar and Mauro Arango, none of the portions cited by SAE actually establish the “facts” they are purported by SAE to demonstrate. Thus, SAE fails to demonstrate with admissible evidence that Richard started Meritronics to compete directly with SAE and did in fact so compete.

SAE additionally fails to establish that Richard stole inventory, equipment, computers and other items from it to utilize in Meritronics. SAE cites to portions of Yates’ deposition testimony wherein he explains that he hired a private investigator to follow Richard to the premises of Meritronics and the investigator took photographs of equipment there that “could have been” stolen from SAE. (UMF No. 6.) Mr. Yates’ assertions in this regard amount to nothing more than speculation, with Mr. Yates himself unable to say for certain that those materials, which he saw in photographs, belonged to SAE.

SAE’s third cause of action for intentional interference with prospective economic advantage has five elements: “(1) the existence, between the plaintiff and some third party, of an economic relationship that contains the probability of future economic benefit to the plaintiff; (2) the defendant’s knowledge of the relationship; (3) intentionally wrongful acts designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm proximately caused by the defendant’s action.” (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1164-1165.) A plaintiff who seeks to recover for such interference has the burden of proving that the defendant’s interference was wrongful by some measure beyond the fact of the interference itself. (See Della Penna v. Toyota Motor Sales, U.S.A. (1995) 11 Cal.4th 376, 392-393.)

SAE maintains that it has met each of the aforementioned elements, asserting that it had business relationships with Stellartech and HiQ of which Richard was aware due to his having served as President of the company and that he went on, through Meritronics, to attempt to and do business with those entities. SAE further proclaims that Richard’s conduct was independently wrongful because it constitutes a breach of fiduciary duty. While it is true that a breach of fiduciary duty can constitute “independently wrongful” conduct for the purposes of the tort of intentional interference with prospective economic advantage (see Gemini Aluminum Corp. v. Cal. Custom Shapes (2002) 95 Cal.App.4th 1249, 1258), as articulated above, SAE fails to establish, with admissible evidence, that Richard breached his fiduciary duties to SAE. With respect to this cause of action in particular, SAE cites additional deposition testimony from Gary Seeger, Stellartech’s Person Most Knowledgeable, to establish that Stellartech refused to continue to do business with SAE because of Richard’s conduct, but a review of this testimony does not support this conclusion. Just based on the testimony cited, it is not clear what the nature of the “debacle” that Seeger is referring to is, or that Stellartech’s decision to part ways with SAE was the result of Richard’s conduct as opposed to Yates and Mr. Murphy’s. Even if the Court was willing to interpret the foregoing as laying blame for the disruption of the business relationship at Richard’s feet, there is no indication of what Seeger understood Richard to have done. Thus, the testimony cited by SAE fails to establish that Richard intentionally interfered with SAE and Stellartech’s relationship, and violated his fiduciary duties in doing so.

In the eighth cause of action, SAE alleges that Richard and Guy intended to and did induce Stellartech, HiQ and Photon Infotech to breach their agreements with SAE, causing SAE to suffer significant harm, including interfering with its ability to continue operating. (SAC, ¶ 67-74.) In order to succeed on a claim for inducing breach of contract, a plaintiff is required to prove the following: (1) the existence of a contract between the plaintiff and a third party; (2) the defendant was aware of that contract; (3) the defendant intended to cause the third party to breach the contract; (4) the defendant’s conduct caused the third party to breach the contract; (5) the plaintiff was harmed; and (6) the defendant’s conduct was a substantial factor in causing the plaintiff’s harm. (CACI No. 2200; see also Pacific Gas & Electric Co. v. Bear Stearns & Co. (1990) 50 Cal.3d 1118, 1129.)

Here, it is undisputed that contracts existed between SAE and Stellartech and HiQ and that Richard was aware of those contracts. (UMF Nos. 26, 27.) But SAE runs into the same issues that it did with its preceding claims, namely, it fails to offer admissible evidence (or any other evidence, for that matter) necessary to establish all of the elements of its cause of action. SAE relies on HiQ’s responses to interrogatories in a separate action, Richard’s complaint in a separate action, and portions of Seeger’s deposition testimony to establish Richard inducing HiQ and Stellartech to breach their agreements with SAE. As explained above, neither HiQ’s responses not Richard’s complaint are admissible evidence, and Seeger’s deposition testimony does not demonstrate what SAE claims that it does. Thus, SAE has not met its initial burden on this cause of action and is not entitled to summary adjudication in its favor.

Finally, on its remaining cause of action for negligent interference with economic advantage, as with the third cause of action, SAE identifies the “independently wrongful” conduct committed by Richard to be a breach of his fiduciary duties. However, as explained in greater detail above, SAE fails to submit admissible evidence which establishes that Richard breached his fiduciary duties. Consequently, SAE has not met its burden on the ninth cause of action and is therefore not entitled to summary adjudication of this claim.