Case Number: BC706361 Hearing Date: June 05, 2018 Dept: 85

Dependable Highway Express, Inc. v. Shane Van Der Waag, et al., BC706361

Tentative decision on application for preliminary injunction: granted in part

Plaintiff Dependable Highway Express, Inc. (“DHE”) applies for a preliminary injunction against Defendants Shane Van Der Waag, (“Van Der Waag”), Luis Zarazua (“Zarazua”), Next Trucking, Inc. (“Next Trucking”) (collectively Van Der Waag, Zarazua and Next are referred to as the “Van Der Waag Defendants”), IDC Logistics, Inc. (“IDC”), and Sequoia Capital (“Sequoia”) enjoining them from (1) using any customer, employee, driver, or other proprietary business information belonging to DHE and (2) contacting or soliciting any customers, employees, or drivers of DHE whose confidential customer information was wrongfully taken or acquired by Defendants.

The court has read and considered the moving papers, oppositions, and replies, and renders the following tentative decision.

A. Statement of the Case

1. Complaint

Plaintiff DHE commenced this proceeding on May 16, 2018, alleging causes of action for (1) misappropriation of trade secrets and (2) breach of contract. The Complaint alleges as follows.

DHE is a supply chain service provider whose services include trucking, freight forwarding, warehousing, and distribution. Defendant Next Trucking, a trucking company, and Defendant IDC, Next Trucking’s warehousing and logistics company, are direct competitors of DHE. Defendant Sequoia is an entity that provides funding to both Next Trucking and IDC.

In March 2010, DHE hired Defendant Van Der Waag as an account executive. On April 6, 2015, Van Der Waag was promoted to the position of Director of Intermodal and Drayage Services, heading up DHE’s Harbor Division. In this role, Van Der Waag was responsible for overseeing the entire Harbor Division and its employees, as well as servicing and retaining customer accounts and expanding DHE’s customer base. On March 16, 2018, Van Der Waag voluntarily terminated his employment with DHE to work for Next Trucking.

In January 2013, Defendant Zarazua joined DHE as the Dispatch Manager of its Harbor Division. On April 6, 2018, Zarazua resigned from his employment with DHE to work for Next Trucking.

While still employed at DHE, Van Der Waag, without authorization, began forwarding to his personal email accounts several emails with attached files containing confidential customer information, driver lists, and employee lists. Van Der Waag misappropriated this information to directly compete with DHE through his new employer Next Trucking. Van Der Waag, Zarazua, IDC, and Next Trucking have used and will continue to use this information to contact DHE’s customers, employees, and drivers in an effort to divert such customers from DHE.

2. Course of Proceedings

On May 16, 2018, the court granted Dependable Highway’s ex parte application for a temporary restraining order (“TRO”) enjoining Defendants from (1) using, publishing, disclosing, or authorizing others to use, publish, or disclose any information on the “Master Driver List” spreadsheet and (2) contacting, soliciting, diverting, taking away, or doing business with any of the individuals listed on the Master Driver List spreadsheet. The court also issued an order show cause (“OSC”) re: preliminary injunction why Defendants should not be enjoined from (1) using any customer, employee, driver, or other proprietary business information belonging to DHE and (2) contacting or soliciting any customers, employees, or drivers of DHE whose confidential customer information was wrongfully taken or acquired by Defendants.

Proofs of service on file show that IDC was served by personal service with the Summons, Complaint, moving papers, and order on May 17, 2018. Acknowledgements of receipt show that Van Der Waag, Zarazua, and Next Trucking were served with the Summons, Complaint, ex parte application, and order on May 18, 2018. No proofs of service address Sequoia.

B. Applicable Law

1. Preliminary Injunction

An injunction is a writ or order requiring a person to refrain from a particular act; it may be granted by the court in which the action is brought, or by a judge thereof; and when granted by a judge, it may be enforced as an order of the court. CCP §525. An injunction may be more completely defined as a writ or order commanding a person either to perform or to refrain from performing a particular act. See Comfort v. Comfort, (1941) 17 Cal.2d 736, 741. McDowell v. Watson, (1997) 59 Cal.App.4th 1155, 1160.[1] It is an equitable remedy available generally in the protection or to prevent the invasion of a legal right. Meridian, Ltd. v. City and County of San Francisco, et al., (1939) 13 Cal.2d 424.

The purpose of a preliminary injunction is to preserve the status quo pending final resolution upon a trial. See Scaringe v. J.C.C. Enterprises, Inc., (1988) 205 Cal.App.3d 1536. Grothe v. Cortlandt Corp., (1992) 11 Cal.App.4th 1313, 1316; Major v. Miraverde Homeowners Assn., (1992) 7 Cal.App.4th 618, 623. The status quo has been defined to mean the last actual peaceable, uncontested status which preceded the pending controversy. Voorhies v. Greene (1983) 139 Cal.App.3d 989, 995, quoting United Railroads v. Superior Court, (1916) 172 Cal. 80, 87. 14859 Moorpark Homeowner’s Assn. v. VRT Corp., (1998) 63 Cal.App.4th 1396. 1402.

A preliminary injunction is issued after hearing on a noticed motion. The complaint normally must plead injunctive relief. CCP §526(a)(1)-(2).[2] Preliminary injunctive relief requires the use of competent evidence to create a sufficient factual showing on the grounds for relief. See e.g. Ancora-Citronelle Corp. v. Green, (1974) 41 Cal.App.3d 146, 150. Injunctive relief may be granted based on a verified complaint only if it contains sufficient evidentiary, not ultimate, facts. See CCP §527(a). For this reason, a pleading alone rarely suffices. Weil & Brown, California Procedure Before Trial, 9:579, 9(ll)-21 (The Rutter Group 2007). The burden of proof is on the plaintiff as moving party. O’Connell v. Superior Court, (2006) 141 Cal.App.4th 1452, 1481.

A plaintiff seeking injunctive relief must show the absence of an adequate damages remedy at law. CCP §526(4); Thayer Plymouth Center, Inc. v. Chrysler Motors, (1967) 255 Cal.App.2d 300, 307; Department of Fish & Game v. Anderson-Cottonwood Irrigation Dist., (1992) 8 Cal.App.4th 1554, 1565. The concept of “inadequacy of the legal remedy” or “inadequacy of damages” dates from the time of the early courts of chancery, the idea being that an injunction is an unusual or extraordinary equitable remedy which will not be granted if the remedy at law (usually damages) will adequately compensate the injured plaintiff. Department of Fish & Game v. Anderson-Cottonwood Irrigation Dist., (1992) 8 Cal.App.4th 1554, 1565.

In determining whether to issue a preliminary injunction, the trial court considers two factors: (1) the reasonable probability that the plaintiff will prevail on the merits at trial (CCP §526(a)(1)), and (2) a balancing of the “irreparable harm” that the plaintiff is likely to sustain if the injunction is denied as compared to the harm that the defendant is likely to suffer if the court grants a preliminary injunction. CCP §526(a)(2); 14859 Moorpark Homeowner’s Assn. v. VRT Corp., (1998) 63 Cal.App.4th 1396. 1402; Pillsbury, Madison & Sutro v. Schectman, (1997) 55 Cal.App.4th 1279, 1283; Davenport v. Blue Cross of California, (1997) 52 Cal.App.4th 435, 446; Abrams v. St. Johns Hospital, (1994) 25 Cal.App.4th 628, 636. Thus, a preliminary injunction may not issue without some showing of potential entitlement to such relief. Doe v. Wilson, (1997) 57 Cal.App.4th 296, 304. The decision to grant a preliminary injunction generally lies within the sound discretion of the trial court and will not be disturbed on appeal absent an abuse of discretion. Thornton v. Carlson, (1992) 4 Cal.App.4th 1249, 1255.

A preliminary injunction ordinarily cannot take effect unless and until the plaintiff provides an undertaking for damages which the enjoined defendant may sustain by reason of the injunction if the court finally decides that the plaintiff was not entitled to the injunction. See CCP §529(a); City of South San Francisco v. Cypress Lawn Cemetery Assn., (1992) 11 Cal.App.4th 916, 920.

C. Statement of Facts[3]

1. Plaintiff’s Evidence

a. Background

DHE is a supply chain service provider whose services include trucking, freight forwarding, warehousing, and distribution. Dougan Decl. ¶2.

Since its founding, DHE has invested countless hours and money into acquiring and maintaining its customers. Dougan Decl. ¶3. Most of its customers were developed through advertising, reputation, and referrals. Id. DHE maintains lists of all of its customers, their contact information, and their account-specific information including information on their individual business needs and payment and financing structure. Dougan Decl. ¶5.

DHE has also expended great effort in finding competent and loyal drivers. Dougan Decl. ¶4. The drivers that DHE retains are trustworthy and have longevity. Id. DHE maintains lists of its employees and drivers with their contact and salary or rate information. Dougan Decl. ¶5.

This information on DHE’s customers, employees, and drivers is kept confidential as it is valuable to the company. Dougan Decl. ¶6. The information was difficult and costly to acquire and took years to compile. Id. To ensure that the information remains confidential, DHE counsels all of its employees that the customer lists and sales information are confidential and a DHE trade secret. Dougan Decl. ¶7. DHE requires its employees to agree in writing to a nondisclosure agreement which only permits employees to access the information on a need-to-know basis. Id., Ex. 1. The non-disclosure agreement expressly refers to DHE’s customer lists and customer information, compensation and terms of employment for its employees, the names and price information for DHE’s vendors, and information concerning DHE’s business plan and profitability. Ex. 1, p. 25. The non-disclosure agreement further specifies when and how the employee should speak about customer information that is confidential. Ex. 1, p. 27.

b. Resignation

In March 2010, DHE hired Defendant Van Der Waag as an account executive. Dougan Decl. ¶8. On April 6, 2015, Van Der Waag was promoted to the position of Director of Intermodal and Drayage Services, heading up DHE’s Harbor Division. Id. In this role, Van Der Waag was responsible for overseeing the entire Harbor Division and its employees, as well as servicing and retaining customer accounts and expanding DHE’s customer base. Id. On March 16, 2018, Van Der Waag voluntarily terminated his employment with DHE to work for Next Trucking, one of DHE’s direct competitors. Id.

In January 2013, Defendant Zarazua joined DHE as the Dispatch Manager of its Harbor Division. Dougan Decl. ¶9. On April 6, 2018, Zarazua resigned from his employment with DHE to work for Next Trucking. Id.

Both Van Der Waag and Zarazua signed Employee Acknowledgement forms in which they agreed to abide by DHE’s non-disclosure policies. Dougan Decl. ¶10, Ex. 2.

On March 5, 2018, Van Der Waag informed DHE that he would be terminating his employment with DHE on March 16, 2018. Dougan Supp. Decl. ¶3.

c. Emails

In the weeks leading up to his resignation, Van Der Waag systematically sent nearly 100 emails from his DHE email account to his personal email account containing trade secret information, including customer lists and information, employee lists, and driver lists. Dougan Decl. ¶11; Dougan Supp. Decl. ¶3.

i. Drivers / Employees

On March 2, 2018, Van Der Waag sent DHE’s confidential Master Driver List spreadsheet to his personal account. Dougan Supp. Decl. ¶4, Ex. 1. The spreadsheet contains private information for more than 130 DHE drivers, including each driver’s social security number, date of birth, home address, personal cell phone number, and driver’s license number. Id.

On the same date, Van Der Waag also sent himself a spreadsheet entitled “Possible business-staff.xlsx.” Dougan Supp. Decl. ¶7, Ex. 4. This spreadsheet contains confidential pricing, revenue, and cost information related to seven of DHE’s customers, as well as historical shipping volume. Dougan Supp. Decl. ¶8.

At the bottom, the spreadsheet also contained a list of seven individuals employed at DHE at the time along with their titles and salaries. Dougan Supp. Decl. ¶7, Ex. 4.[4] Of these seven individuals, five have since left DHE and accepted employment with Next Trucking. Id. Another submitted a declaration attesting to Van Der Waag’s solicitation of her employment at Next Trucking. Id.; Pisano Decl. ¶¶ 2-3. Van Der Waag has sent himself versions of this spreadsheet on four other occasions, including February 23 and March 6, 2018. Dougan Supp. Decl. ¶9, Ex. 5.

On March 12, 2018, Van Der Waag sent six documents to his personal account. Dougan Supp. Decl. ¶5, Ex. 2. Two of these documents are spreadsheets containing confidential information related to approximately 120 DHE drivers, including each driver’s total revenue produced, shipments, hours, and miles for the particular time period, as well as revenue produced per hour and mile. Id.

On March 14, 2018, Van Der Waag sent a spreadsheet labelled “Reviews-Master.xlsx” to his personal account. Dougan Supp. Decl. ¶6, Ex. 3. This spreadsheet depicts confidential information related to more than 1,000 DHE employees, including each employee’s name, date of birth, and pay rate. Id.

ii. Customers

On at least 48 occasions between February 26, 2018 and the termination of his employment on March 14, 2018, Van Der Waag forwarded from his DHE email account to his personal account various communications with DHE customers containing inter alia contact information for each customer as well as information related to customer orders. Dougan Decl. ¶12, Ex. 3; Dougan Supp. Decl. ¶10, Ex. 6.

iii. Proprietary Business Information

On March 14, 2018, Van Der Waag emailed to his personal account (1) a letter to DHE customers regarding DHE’s New Chassis & Per Diem Policy which sets forth DHE’s transition to proprietary chassis pool and new billing rates and provides a discussion of benefits (Dougan Supp. Decl. ¶17, Ex. 10); (2) a DHE’s Driver Performance Evaluation form developed by DHE in order to improve and maximize driver performance (Dougan Supp. Decl. ¶18, Ex. 11); (3) a Harbor Drayage Rate Agreement between DHE and a customer (Dougan Supp. Decl. ¶19, Ex. 12); (4) a one-page customer profile form (Dougan Supp. Decl. ¶20, Ex. 13); and (6) a DHE rate list for Northern California (Dougan Supp. Decl. ¶21, Ex. 14).

d. Solicitation

i. Drivers / Employees

Van Der Waag and Zarazua have solicited numerous drivers and other employees to work for Next Trucking using this trade secret information. See Dougan Decl. ¶16, Ex. 5. Zarazua tried to persuade several of DHE’s drivers in-person and telephonically that they should leave DHE to work at Next Trucking because Next Trucking will pay more and because Next Trucking will run DHE out of business. See, e.g., Camacho Decl. ¶¶ 2-4; Dougan Decl. ¶16; Herrera Decl. ¶¶ 2-5.

Using the confidential information, Van Der Waag has sent letters to DHE drivers and employees to lure them into employment at Next Trucking. Dougan Decl. Ex. 6; Dougan Supp. Decl. ¶12, Ex. 7; Pisano Decl. ¶¶ 2-3; Young Decl. ¶2, Ex. A.

DHE’’s CFO, Michael Dougan, has been informed by Arrin Burruss that he was solicited for employment at Next by Elton Chung (“Chung”), Next Trucking’s co-founder and IDC’s president. Dougan Decl. ¶15; Dougan Supp. Decl. ¶24.

ii. Customers

Van Der Waag and Zarazua have already directly solicited by email no less than ten DHE customers during the final days of their employment with DHE. Dougan Supp. Decl. ¶14, Ex. 8. In each email, Van Der Waag announced his departure from DHE and confirmed that he would follow up with the DHE customer once he commences employment at Next Trucking. Id. In one email, Van Der Waag informed a customer that he is “taking a new position in the next few weeks with a company called Next Trucking/IDC Logistics.” Id.

2. Defendant IDC’s Evidence

IDC and Chung have never solicited or hired any DHE personnel. Chung Decl. ¶3. Neither Van Der Waag nor Zarazua is employed by IDC in any capacity. Id.

IDC and Chung have also both not received any of DHE’s confidential information from Van Der Waag, Zarazua, Next Trucking, or any other source. Chung Decl. ¶¶ 4-5.

IDC has no ownership in Next Trucking and vice-versa. Chung Decl. ¶6.

3. Van Der Waag Defendants’ Evidence

The Van Der Waag Defendants are willing to delete, destroy, or return any of the DHE emails at issue in this case. Caplan Decl. ¶4.

A search for DHE on LinkedIn returned 310 results of current and former DHE employees. Mayhugh Decl. ¶3. A search for DHE on Indeed.com revealed 1007 reported salaries by position, including Truck Driver, Local, Driver, and Van Driver. Mayhugh Decl. ¶4.

D. Analysis

DHE applies for a preliminary injunction against Defendants enjoining them from (1) using any customer, employee, driver, or other proprietary business information belonging to DHE and (2) contacting or soliciting any customers, employees, or drivers of DHE whose confidential customer information was wrongfully taken or acquired by Defendants.[5]

1. Probability of Success

a. Trade Secret Misappropriation

A trade secret means information, including a formula, pattern, compilation, program, device, method, technique, or process, that (1) derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use and (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. Civ. Code §3426.1(d). Confidential customer lists warrant trade secret protection where the employer has expended time and effort identifying customers with particular needs or characteristics and the information is not otherwise readily ascertainable. See, e.g., Morlife, Inc. v. Perry, (1997) 56 Cal.App.4th 1514, 1521-22.

Misappropriation of a trade secret means (1) the acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means or (2) disclosure or use of a trade secret of another without express or implied consent by a person who, inter alia, used improper means to acquire knowledge of the trade secret. Civ. Code §3426.1(b). To state a prima facie claim for misappropriation of trade secrets, the plaintiff must demonstrate (1) the plaintiff owned a trade secret, (2) the defendant acquired, disclosed, or used the plaintiff’s trade secret through improper means, and (3) the defendant’s actions damaged the plaintiff. Cytodyn, Inc. v. Amerimmune Pharmaceuticals, Inc., (“Cytodyn”) (2008) 160 Cal.App.4th 288, 297.

Actual or threatened misappropriation of trade secrets may be enjoined. Civ. Code §3426.2(a); see also Retirement Group v. Galante, (2009) 176 Cal.App.4th 1226, 1238 (trial court may enjoin “former employee from using trade secret information to identify existing customers, to facilitate the solicitation of such customers, or to otherwise unfairly compete with the former employer.”) If the court determines that it would be unreasonable to prohibit future use, an injunction may condition future use upon payment of a reasonable royalty for no longer than the period of time the use could have been prohibited. Civ. Code §3426.2(b). In appropriate circumstances, affirmative acts to protect a trade secret may be compelled by court order. Civ. Code §3426.2(c).

b. Defendant IDC

Defendant IDC contends that DHE has presented no evidence showing that it participated in or committed any of the wrongful acts alleged. Opp. at 2.

IDC’s point is well-taken. IDC and Next are separate companies. IDC has no ownership in Next Trucking and vice-versa. Chung Decl. ¶6. Neither Defendant Van Der Waag nor Defendant Zarazua is employed by IDC in any capacity. Id. IDC denies that it has ever solicited or hired any DHE personnel. Chung Decl. ¶3. IDC denies that it has received any of DHE’s confidential information from the Van Der Waag Defendants or any other source. Chung Decl. ¶¶ 4-5.

DHE has scant evidence that IDC was involved in any wrongful act. Dougan, DHE’s CFO, asserts that it competes with Next in trucking and IDC in warehousing. Dougan has been told that Chung, IDC’s founder and also a Next co-founder, directly solicited DHE employees to work at Next. Dougan Decl. ¶15. This evidence was received only to show notice to DHE and not for its truth, and the employees involved do not submit declarations to this effect. In contrast, Chung and IDC’s General Manager, Steven Senecal, state that neither they nor IDC has solicited or taken away business from DHE. Chung Decl. ¶7; Senecal ¶3. DHE has not shown a reasonable probability of success that Defendant IDC has received or used any of DHE’s allegedly confidential information.

In reply, DHE then proceeds to point out numerous inferences suggesting IDC’s collusion: (1) Chung is a co-founder of Next (Dougan Decl. (Ex. 4); (2) Van Der Waag told a DHE customer that he got a job with “Next Trucking / IDC Logistics” (Dougan Supp. Decl. Ex. 8); (3) an IDC Logistics employee sent an email to Van Der Waag upon his hiring that stated: “Welcome Aboard” (Dougan Supp. Decl. Ex. 18); and (4) Van Der Waag introduced Chung to a Wall Street Journal reporter. Dougan Supp. Decl. Ex. 17. DHE contends that this evidence clearly shows that Next and IDC work in tandem such that a benefit to Next results in a corresponding benefit to IDC. Reply at 4.

This is insufficient to hold IDC responsible directly. All parties acknowledge that IDC and Next are two separate entities, and the inferences relied upon by DHE lack the foundation of any direct supporting evidence.

Therefore, IDC cannot be directly enjoined. Of course, a preliminary injunction against the Van Der Waag Defendants and their agents would sweep IDC back in if IDC were shown to be an agent of a Van Der Waag Defendant that received misappropriated confidential information. The court will not address whether an injunction should issue for the Van Der Waag Defendants.

c. Trade Secret

DHE argues that its employee and driver information, customer information, and business information, are trade secrets. App. at 7; Suppl. Br. at 2.

(i) Customer Information

To be a trade secret, DHE’s customer information must derive independent economic value from not being generally known to the public. Civ. Code §3426.1(d). Dougan states that DHE has invested numerous hours and dollars over the years (1) acquiring its customers through advertising, reputation and, referrals and (2) maintaining its customer base by offering high-quality customer service and keeping detailed logistical, account-specific information. Dougan Decl. ¶¶ 3, 6.

The list must be subject to reasonable efforts to maintain its secrecy. Civ. Code §3426.1(d). Dougan explains that DHE counsels all employees upon their hiring that this information is confidential and critical to DHE’s success. Dougan Decl. ¶7. DHE also requires its employees to agree in writing to a non-disclosure agreement to this effect and only allows employees to access the list on a need-to-know basis. Id.

The Van Der Waag Defendants[6] contend that DHE has failed to identify the customer list with requisite particularity. Opp. at 10-11. Defendants overstress this requirement. A party seeking injunctive relief must describe the subject matter of the trade secret with sufficient particularity to separate it from matters of general knowledge in the trade and to permit the defendant to ascertain at least the boundaries within which the secret lies. Agency Solutions.Com, LLC v. TriZetto Group, Inc., (E.D. Cal. 2011) 819 F.Supp.2d 1001, 1017. DHE has identified with sufficient particularity the customer lists subject to injunctive relief: the lists which Van Der Waag misappropriated from DHE. See Dougan Supp. Decl. ¶¶ 9-10, Exs. 5-6. Defendants’ contention that the spreadsheets are redacted is of no moment; the pertinent categories of information contained on the lists is disclosed in the filed documents.

Defendants take issue with the fact that DHE publicly filed unredacted customer information in their moving papers. Opp. at 12. DHE did not redact seven of the data columns from the customer list spreadsheet. Compare Dougan Decl. Ex. 3 and Dougan Supp. Decl. Ex. 4. Defendants contend that this public filing nullifies its status as a trade secret and shows that DHE is relying on inadequately identified customer lists. Opp. at 13.

Defendants are correct for the information that was publicly disclosed. However, 18 other categories were excluded from the spreadsheet. Ex. 4. There also are 48 redacted customer contact information emails that Van Der Waag forwarded to himself. Dougan Supp. Decl. Ex. 6. The confidentiality of this customer information has not been compromised.

Defendants argue that the spreadsheets appear to disclose only historical charges to seven customers and contain no dates, locations, customer business needs, payment and financing structure, or logistical components as promised by DHE. See Dougan Decl. ¶5. The customer contact information in Dougan Decl. Ex. 3 also concerns a single customer, Cornerstone Logistics, and that information is available to anyone online. Opp. at 11-12.

The court agrees that DHE has not explained the significance of the redacted categories in Exhibit 4, and how they show pricing and cost information, or shipping volume. See Dougan Supp. Decl. ¶8. However, Defendants fail to mention the customer contact information in the 48 emails in Exhibit 6 of the Dougan supplemental declaration.

Defendants claim that the only evidence supporting the customer information’s independent economic value derived from secrecy is Dougan’s conclusory statements that the information was “difficult and costly to acquire and maintain, and took years to compile” and that it “cannot be obtained by merely making a cold call to the potential customer.” Opp. at 12; Dougan Decl. ¶6.

Defendants fail to read the declaration closely enough. Dougan avers that DHE’s customers were developed through advertising, reputation, and referrals. Dougan Decl. ¶3. The clear implication is that the customer lists are the fruit of advertising dollars and a strong reputation. Further, Dougan avers that the information contains, not only customer names and addresses, but “identification and contact information of the specific individuals that a sales representative must target” and “their individual business needs.” Dougan Decl. ¶ 6. This is information that possesses economic value.

Defendants assert that a substantial portion of the customer list can be easily discovered by any member of the public or the shipping industry, as exemplified by Exhibit 3 to the Dougan declaration. Opp. at 14. Defendants contend that that the customer list cannot therefore be deemed a trade secret. Id. Defendants present several cases to support its contention customer lists should not be considered trade secrets in the shipping industry. Opp. at 13. Defendants principally rely on American Paper & Packaging Products, Inc. v. Kirgan, (“APP”) (1986) 183 Cal.App.3d 1318.

In APP, the appellate court denied trade secret status to customer lists, stating that “[w]hile the information sought to be protected here … may not be generally known to the public, they certainly would be known or readily ascertainable to other persons in the shipping business.” 183 Cal.App.3d at 1326.

This statement does not mean that no customer list in the shipping industry can be protected as a trade secret. There is no evidence that DHE’s competitors, such as Next, would know or readily ascertain DHE’s customer information. Moreover, the mere compilation of readily available information may be protected as a trade secret so long as it has not yet been ascertained by others in the industry. Abba Rubber Co. v. Seaquist, (1991) 235 Cal.App.3d 1, 21.

Defendants contend that DHE inadequately shows that it took reasonable steps to maintain the confidentiality of the customer list. Defendants cite Humphreys & Associates, Inc. v. Cressman, (“Cressman”) (C.D. Cal., Aug. 31, 2015) 2015 WL 12698428, at *4, which held that “requiring employees to sign confidentiality agreements” and “limiting access to information” were too vague and did not show that the party seeking trade secret protection took special care to protect its customers’ identities or contact information. Defendants contend that DHE provides only a single statement from Dougan that employees cannot disclose customer information. Opp. at 15.

Defendants are incorrect. As the Cressman court noted, reasonable efforts to maintain secrecy have been held to include advising employees of the existence of a trade secret and limiting access to a trade secret on a need-to-know basis. See Whyte v. Schlage Lock Co., (2002) 101 Cal.App.4th 1443, 1454. This is precisely what DHE did. DHE requires signature on the non-disclosure agreement, counsels its new employees that such information is confidential, restricts the information to a “need to know” basis, and prohibits removal of the information from the premises. Dougan Decl. ¶7.

Alternatively, Defendants argue that DHE’s nondisclosure agreement is void as a matter of law. Opp. at 16. Non-competition provisions of contracts, including non-solicitation of customers and employees, are generally unenforceable. See Bus. & Prof. Code §16600. Defendants contend that the non-disclosure agreement has a “limitless” definition of trade secret information, which renders it void and unenforceable in its entirety. Opp. at 16-17.

Defendants have equated the non-disclosure agreement with a non-competition agreement. They are distinct: the former may be valid and the latter is invalid. Loral Corp. v. Moyes, (1985) 174 Cal.App.3d 268, 276. The agreement at issue, entitled “Non-Disclosure of Confidential Information and Trade Secrets,” is a nondisclosure agreement. In pertinent part, it prohibits DHE employees from disclosing DHE trade secret information to unauthorized persons. Dougan Decl. Ex. 1. It also prohibits DHE employees from using trade secret information to solicit DHE employees to terminate their employment or to solicit DHE customers to another person. Id. It concludes by saying that it is not “meant to limit your use of your own personal technical knowledge of the industry in which you work, except for the confidential or trade secret information which you have learned as a result of your employment with DHE.” Id. As illustrated by this language, the nondisclosure agreement solely seeks to limit the disclosure of its trade secret information and solicitation based thereon; it does not hamper competition by preventing solicitation of either customers or employees.

Defendants’ reliance on Dowell v. Biosense Webster, Inc., (“Dowell”) (2009) 179 Cal.App.4th 564, is mistaken. Opp. at 17. Dowell examined a non-compete clause prohibiting an employee from rendering services to a competitor where those services could enhance the use of a conflicting product through the use of confidential information. Id. at 578. DHE’s non-disclosure agreement imposes no such limitation on future employment.

(ii) Driver Information

DHE also presents a prima facie case that its driver list is a trade secret. Pursuant to Civil Code section 3426.1(d), DHE presents evidence that the driver list derives independent economic value from not being generally known to the public because finding competent and loyal drivers is extremely valuable to companies in the shipping industry. Dougan Decl. ¶4. Dougan further explains that DHE’s workers are exceptional because they are trustworthy and have longevity. Id. DHE also presents evidence that it provides reasonable efforts to maintain the secrecy of this list. Like the customer information, employees sign a non-disclosure agreement which states, inter alia, that they will not disclose information regarding DHE personnel or agents. Dougan Decl. ¶7, Ex. 1.

Defendants persuasively argue that this prima facie case has been overcome. Opp. at 14. Defendants argue that DHE failed to take any efforts to protect the Driver List as confidential, and then waived any purported trade secret status by filing an unredacted copy of its Master Driver List in open court. Dougan Decl. ¶12, Ex. 3; see Masonite Corp. v. County of Mendocino Air Quality Management Dist. (1996) 42 Cal.App.4th 436, 454. By doing so, DHE can no longer reasonably contend that its driver list is not readily ascertainable.

In reply, DHE argues that the driver list is redacted. Reply at 4. DHE points to an ostensibly identical Master Driver List attached to Dougan’s supplemental declaration featuring a “Redacted” label to indicate that certain columns of information have been removed. Compare Dougan Supp. Decl. Ex. 1 with Dougan Decl. Ex. 3. Dougan asserts that it redacted social security number, date of birth, street address, phone number, and driver’s license number information from the list attached to the original Dougan declaration. DHE contends that these redactions rebut Defendants’ waiver defense. Reply at 4.

DHE’s showing that the drivers’ personal information was redacted in Exhibit 1 suggests that it was complying with privacy issues and not protecting confidentiality. Compare Dougan Supp. Decl. ¶4 (list was redacted for purposes of privacy and confidentiality). Dougan admits that “a listing of [DHE’s] drivers would be extremely valuable to a competitor.” Dougan Decl. ¶4. As Dougan explains, DHE’s drivers are particularly trustworthy and have longevity. Id. This strongly suggests that it is the driver identities that are confidential because DHE does not want competitors poaching its employees. By disclosing their identities in a publicly-filed document, and enabling competitors to simply search the internet for driver contact information (see Mayhugh Decl. ¶3), DHE has enabled any competitor to contact its drivers. The secrecy of the Driver List has evaporated.

On the other hand, Exhibit 2, the spreadsheet of 120 drivers with the driver’s total revenue, shipments, hours, miles, and revenue per hour and mile, is confidential information that remains protected.[7]

d. Improper Means

The second element of trade secret misappropriation is that the defendant has acquired, disclosed, or used the plaintiff’s trade secret through improper means. Cytodyn, supra, 160 Cal.App.4th at 297. Improper means of acquiring a trade secret includes breach or inducement of a breach of a duty to maintain secrecy. K.C. Multimedia, Inc. v. Bank of America Technology & Operations, Inc., (2009) 171 Cal.App.4th 939, 961.

Defendants have disclosed and used DHE’s trade secret through improper means. Van Der Waag and Zarazua, now Next employees, both signed non-disclosure agreements requiring them to maintain the secrecy of DHE’s customer list and confidential employee information. Nevertheless, Van Der Waag emailed this information to himself. Dougan Decl. ¶¶ 12-13, Exs. 1-2.[8]

e. Conclusion

DHE has shown a probability of success on its trade secret claim for the customer information in Dougan Supplemental Exhibits 4 and 6 that was not publicly disclosed in Dougan Exhibit 3, and any other confidential customer information emailed by Van Der Waag to himself. DHE also has shown a probability of success on its trade secret claim for the driver information in Dougan Supplemental Exhibit 2, and any other confidential driver information emailed by Van Der Waag to himself, but not the driver information publicly disclosed in Dougan Exhibit 3.

3. Balance of Hardships

In determining whether to issue a preliminary injunction, the second factor which a trial court examines is the interim harm that plaintiff is likely to sustain if the injunction is denied as compared to the harm that the defendant is likely to suffer if the court grants a preliminary injunction. Donahue Schriber Realty Group, Inc. v. Nu Creation Outreach, (2014) 232 Cal.App.4th 1171, 1177. This factor involves consideration of the inadequacy of other remedies, the degree of irreparable harm, and the necessity of preserving the status quo. Id.

DHE contends that the balance of harms tips in its favor because of the time and money that it invested compiling its customer and driver information. App. at 13; Dougan Decl. ¶3. Over the years, it developed its customer base through advertising, reputation, and referrals. Dougan Decl. ¶3. Dougan avers that DHE is in imminent danger of Defendants using DHE’s trade secrets to wrongfully solicit DHE’s customers. Dougan Decl. ¶20. DHE argues that unlawful solicitation of its customers will cause DHE to lose business and customers and that resulting damages will be unascertainable. App. at 13.

Defendants argue that DHE’s assertion is speculative and unsupported by evidence. Opp. at 20. Defendants are partly correct. DHE’s evidence is speculative, but this is not determinative. A court can restrain actual or threatened misappropriation. Civ. Code §3426.2(a). Irreparable harm is presumed when proprietary information is misappropriated. See Reply at 9. Defendant Van Der Waag’s numerous actions of misappropriation, coupled with the solicitation of DHE’s employees, validates DHE’s concern.

Defendants contend that the balance of harms tips in their favor because the injunction sought would amount to a blanket restriction on competition. Opp. at 19. Disagreed. The injunction would prohibit Defendants from using trade secret information misappropriated by Van Der Waag and used by Zarazua or Next. It only restrains competition to the extent that Next competes unfairly.

The balance of harms weighs in favor of DHE.

E. Conclusion

The application for a preliminary injunction is granted in part. The Van Der Waag Defendants shall be enjoined from using the customer information in Dougan Supplemental Exhibits 4 and 6 that was not publicly disclosed in Dougan Exhibit 3, and any other confidential customer information emailed by Van Der Waag to himself. These Defendants also shall be enjoined from using the driver information in Dougan Supplemental Exhibit 2, and any other confidential driver information emailed by Van Der Waag to himself, but shall not be restrained from using the driver information publicly disclosed in Dougan Exhibit 3. The application is denied as to Defendant IDC.

The court must impose a bond for a preliminary injunction. Neither side has addressed the amount of the bond. The purpose of a bond is to protect the defendant from the harm caused by an improvidently issued preliminary injunction. It generally consists of the attorneys’ fees that will be incurred in setting aside the injunction, and any damages to the defendant’s business from the injunction. The court will address this issue with counsel at hearing.

[1] The courts look to the substance of an injunction to determine whether it is prohibitory or mandatory. Agricultural Labor Relations Bd. v. Superior Court, (1983) 149 Cal.App.3d 709, 713. A mandatory injunction — one that mandates a party to affirmatively act, carries a heavy burden: “[t]he granting of a mandatory injunction pending trial is not permitted except in extreme cases where the right thereto is clearly established.” Teachers Ins. & Annuity Assoc. v. Furlotti, (1999) 70 Cal.App.4th 187, 1493.

[2] However, a court may issue an injunction to maintain the status quo without a cause of action in the complaint. CCP §526(a)(3).

[3] The court has ruled on Defendants’ evidentiary objections by placing “O” for “overruled” and “S” for “sustained” next to the objection, sometimes with a comment, and interlineating the original evidence where an objection was sustained. The Van Der Waag Defendants’ objection to the supplemental exhibits as improperly redacted in violation of sealing requirements of CRC 2.550 et seq. is well taken. However, Van der Waag failed to show any prejudice and the redacted exhibits have been considered.

[4] The spreadsheet list of staff and their salaries was filed in unredacted form. Ex. 4.

[5] DHE’s ex parte application also sought an injunction ordering Defendants to (a) return to DHE all paper copies of customer, employee, driver, and other proprietary business information obtained directly or indirectly from DHE and (b) irrevocably delete all electronic copies of such information. The court declined to issue a TRO or OSC on that issue, but the Van Der Waag Defendants indicate that they are willing to meet this demand.

[6] Hereinafter, the Van Der Waag Defendants shall be referred to as “Defendants”.

[7] DHE presents evidence of employee solicitation, but does not seek to prevent it from continuing except through misuse of confidential employee information. App. at 4-5.

[8] DHE presents evidence concerning misappropriation of its business information (Supp. Br. at 2 (Exs. 10-14), but does not discuss this information in any detail or show its confidentiality. No injunction will issue, but DHE can always seek the return of this information.

Lawzilla Update: Link to relevant information on external website our addition and not part of court’s original tentative ruling.