Case Number: GC051058    Hearing Date: November 07, 2014    Dept: NCG

TENTATIVE RULING (11-7-14)
#3
GC 051058
NEW CASTLE BEVERAGE v. PREMIER FOODS

Plaintiffs’ Motion for Summary Judgment, or, in the Alternative, Summary Adjudication of Sole Cause of Action for Misappropriation and Defendants’ Affirmative Defenses

Plaintiffs’ Application to file under seal Documents in Support of Motion for Summary Judgment is GRANTED.
The court finds that:
(1) There exist overriding interests that overcome the right of public access to the record, the ability to protected alleged trade secrets, and to enforce a confidentiality protective order;
(2) The overriding interests support sealing the record;
(3) A substantial probability exists that the overriding interests will be prejudiced if the record is not sealed;
(4) The proposed sealing is as narrowly tailored as the circumstances permit; and
(5) No less restrictive means exist to achieve the overriding interest.

The findings are based on the facts that the documents describe alleged trade secrets, and the parties have entered into protective order agreements that the subject information remain confidential.

Defendants’ Application to File Under Seal Defendants’ Papers Filed in Opposition to Plaintiffs’ Motion for Summary Judgment, or, in the Alternative, Summary Adjudication is GRANTED.
The court finds that:
(1) There exist overriding interests that overcome the right of public access to the record, the ability to protected alleged trade secrets, and to enforce a confidentiality protective order;
(2) The overriding interests support sealing the record;
(3) A substantial probability exists that the overriding interests will be prejudiced if the record is not sealed;
(4) The proposed sealing is as narrowly tailored as the circumstances permit; and
(5) No less restrictive means exist to achieve the overriding interest.

The findings are based on the facts that the documents describe alleged trade secrets, and the parties have entered into protective order agreements that the subject information remain confidential. .

Plaintiffs’ Motion for Summary Judgment, or, in the Alternative, Summary Adjudication is DENIED.

Plaintiffs have failed to meet their initial burden of establishing all elements of their single cause of action for trade secret misappropriation. Specifically, plaintiffs have failed to submit evidence establishing that they were caused harm or that defendants were unjustly enriched. In addition, even if this element had been established, plaintiffs have failed to submit evidence supporting the damages claimed by plaintiffs under Civil Code section 3426.3. Specifically, plaintiffs concede, in both the original moving papers and the supplement, that they have not submitted any evidence to a) establish damages or unjust enrichment, b) show that neither damages nor unjust enrichment are not provable, or c) establish a reasonable royalty.
Plaintiffs evidently do not intend by this motion to waive their claim for damages, unjust enrichment or a reasonable royalty, but have failed to submit evidence to support a reasonable finding on this issue. In addition, plaintiffs’ request for punitive damages cannot be granted on a motion for summary judgment. See Haines v. Parra (1987) 193 Cal.App.3d 1553, 1560-1561.

Requests for continuance of hearing on the motion by both sides are DENIED. The matter has been previously continued and no good cause has been established for further continuance.

ANALYSIS:
There is only one cause of action pending before the court, for misappropriation of trade secrets. In essence, plaintiffs have not presented to the court any evidence of damages supporting their unjust enrichment remedy sought in connection with the alleged trade secret misappropriation. Nevertheless, plaintiffs seek by this motion in the notice of motion an order enjoining the use of the trade secrets, requiring the return of plaintiff’s property concerning the trade secrets, “and for and the prayer for unjust enrichment, a reasonable royalty, punitive damages, and attorney’s fees and costs…” To the extent there is no evidence concerning the sum sought as a royalty or for unjust enrichment, this relief cannot be granted.

In Department of Industrial Relations v. UI Video Stores (1997) 55 Cal.App.4th 1084, the court specifically held that where issues of the calculation of damages remain to be determined, it is not appropriate to grant summary judgment:
“Although we have determined that Blockbuster is liable to appellant, Code of
Civil Procedure section 437c makes no provision for a partial summary judgment
as to liability. Even summary adjudication may be granted only in limited
instances. ( Code Civ. Proc., @ 437c, subd. (f)(1).) Because issues of
the calculation of damages apparently remain to be determined, it is not
appropriate to grant summary judgment for appellant at this time. (Weil
& Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group
1996) P 10:40.1, p. 10 17 [summary judgment or adjudication improper where
amount of damages raises factual issue].) The correct procedure below would have been a motion to bifurcate the issue of liability, which the parties could have
tried upon the undisputed facts. (Code Civ. Proc., @ 598.) A decision on
the issue of liability against the party on whom liability is sought to be
imposed does not result in a judgment until the issue of damages is resolved.”
Department, at 1097.

To the extent plaintiffs seek to recover punitive damages, it is well settled that punitive damages may not be awarded on a motion for summary adjudication. Haines v. Parra (1987) 193 Cal.App.3d 1553, 1550.

The motion is further deficient with respect to the various adjudications sought, none of which dispose of an entire cause of action, and only two of which address affirmative defenses.

The memorandum of points and authorities affirmatively requests that the court determine that there is no basis for an award of damages or unjust enrichment funds, and that the court set a reasonable royalty for the use of the trade secrets prior to any court order enjoining further use.

Under Civil Code section 3426.3, governing damages for misappropriation of trade secrets:
“(a) A complainant may recover damages for the actual loss caused by misappropriation. A complainant also may recover for the unjust enrichment caused by misappropriation that is not taken into account in computing damages for actual loss.

(b) If neither damages nor unjust enrichment caused by misappropriation are provable, the court may order payment of a reasonable royalty for no longer than the period of time the use could have been prohibited.

(c) If willful and malicious misappropriation exists, the court may award exemplary damages in an amount not exceeding twice any award made under subdivision (a) or (b).”

The original memorandum as well as the supplemental memorandum concede that plaintiffs are unable to offer evidence to a) establish damages or unjust enrichment, b) show that neither damages nor unjust enrichment are not provable, or c) establish a reasonable royalty. Instead, they argue that defendants have failed to cooperate in discovery, so request that a “reasonable royalty be awarded” or that further briefing on damages be permitted. This is not appropriate, particularly as at least one continuance to permit the requested supplemental briefing has been granted. Plaintiff’s initial burden has simply not been met.

It is unclear how plaintiffs, who are bringing this motion, and have the burden of proof, are claiming that they have been prevented from discovering information to support damages, unjust enrichment, or what a reasonable royalty would be. In any case, as argued in the opposition, it is plaintiffs’ burden before seeking royalties to establish that damages and unjust enrichment are not provable. See Morlife, Inc. v. Perry (1997) 56 Cal.App. 4th 1514, 1529 (“the imposition of a reasonable royalty is reserved for those instances where the court finds that neither actual damages to the holder of the trade secret nor unjust enrichment to the user is provable.”). With respect to royalties, this court obviously cannot fix a reasonable royalty in a vacuum. The court of appeal in Morlife noted:
“Appellants claim the correct measure of damages under section 3426.3 should have been to determine a reasonable royalty. 9 However, appellants failed to present any evidence that would allow the trial court to determine what royalty, if any, would be reasonable under the circumstances. As such, they cannot be heard to complain. (See Unilogic, Inc. v. Burroughs Corp. (1992) 10 Cal. App. 4th 612, 628 [12 Cal. Rptr. 2d 741].)
Morlife, at 1529.

The failure to submit evidence on this issue also deprives defendants of the opportunity to challenge the “reasonableness” of any royalty that might be awarded. The court cannot summarily grant the relief requested in the motion, and the motion is therefore denied.

Moreover, as argued in the opposition, the failure to submit any damages or unjust enrichment evidence, or evidence that such damages exist but are not provable, also gives rise to the failure of plaintiffs to establish an essential element of the misappropriation claim—that plaintiff was harmed or defendant unjustly enriched.

CACI 4401 provides
[ Name of plaintiff ] claims that [ name of defendant ] has misappropriated a trade secret. To succeed on this claim, [ name of plaintiff ] must prove all of the following:
1. That [ name of plaintiff ] [owned/was a licensee of] [the following:][ describe each item claimed to be a trade secret that is subject to the misappropriation claim ];

2. That [this/these] [ select short term to describe, e.g., information ] [was/were] [a] trade secret[s] at the time of the misappropriation;

3. That [ name of defendant ] improperly [acquired/used/ [or] disclosed] the trade secret[s];

4. That [[ name of plaintiff ] was harmed/ [or] [ name of defendant ] was unjustly enriched]; and

5. That [ name of defendant ]’s [acquisition/use/ [or] disclosure] was a substantial factor in causing [[ name of plaintiff ]’s harm/ [or] [ name of defendant ] to be unjustly enriched].

Plaintiffs rely on no case law in which a trial court summarily adjudicated such issues when the Court did not have damages evidence before it.

Since plaintiffs have failed to prove each element of their single cause of action entitling them to judgment on the cause of action, or provided any reasonable basis for this court to award damages under the statute, the burden has not shifted here to defendant to either raise a triable issue, or to show that a defense can be established. The motion is denied.