34-2012-00129851

Inszone Insurance Services Inc vs. Dustin Lofrano

Nature of Proceeding: Motion for Summary Adjudication (Bertolino Insurance Agency)

Filed By: Michelman, Sanford L.

The dual motions of Plaintiff Inszone Insurance Services, Inc. d/b/a Proven Insurance
Services, Inc. (“Proven”) for summary adjudication of issues of duty are DENIED.

Proven sells insurance products. (Undisputed Material Fact (“UMF”) 1.) Defendant
Dustin Lofrano (“Lofrano”) served as one of Proven’s producers and also worked for
several years as a producer for Proven’s predecessor. (See UMF 4, 25; Lofrano Decl.,
¶¶ 2, 7.) During his tenure with Proven, Lofrano executed documents meant to protect
the confidentiality of Proven’s client information and proprietary information. (UMF 4-8,
10-11.) By spring 2012, Lofrano was working as a producer for Defendant Bertolino
Insurance Agency (“Bertolino”). According to Proven, Lofrano violated the
confidentiality agreements and misappropriated valuable information belonging to
Proven and its clients. Proven alleges that Bertolino engaged in the misappropriation
as well. In the operative second amended complaint (“SAC”), Proven has pleaded
causes of action against Lofrano for breach of contract, breach of the implied covenant
of good faith and fair dealing, misappropriate of trade secrets and unfair business
practices [B&P Code §§ 17200 et seq.]. The latter two causes of action are also
directed against Bertolino.

Proven now moves for summary adjudication of issues of duty. As to Lofrano, it seeks
an order adjudicating Lofrano’s alleged contractual and statutory duties not to disclose,
use or misappropriate Proven’s client lists, which Proven alleges are “trade secrets.”
As to Bertolino, Proven seeks an order adjudicating only the alleged statutory duty not
to engage in such conduct. The court denies both motions because there are triable
issues of material fact. Specifically, whether the allegedly misappropriated materials
constitute “trade secrets” presents a triable issue.

It is undisputed that, in order for proprietary information to acquire protection as trade
secrets, the proprietor must take reasonable steps to maintain the information’s
th
secrecy. (See CC § 3426.1(d); Morlife, Inc. v. Perry (1997) 56 Cal.App.4 1514, 1522-
1523.) It is also undisputed that “whether information constitutes a trade secret is a
question of fact.” ( Thompson v. Impaxx, Inc. (2003) 113 Cal.App.4th 1425, 1430.)

With respect to all three issues of duty that Proven wants adjudicated, Proven relies on
the following material fact: “Individuals visiting Plaintiff’s place of business are required

to check in with the receptionist on duty.” (UMF 13.) This fact is evidently offered to
demonstrate that Proven took reasonable safeguards to maintain the confidentiality of
the materials Defendants allegedly misappropriated.

Assuming Proven’s evidence in support of UMF 13 discharges Proven’s initial burden
to establish the nonexistence of any triable issue, Defendants’ responsive evidence
demonstrates that a triable issue exists. (See Aguilar v. Atlantic Richfield Co. (2001)
25 Cal.4th 826, 850.) Specifically, Defendants have produced Lofrano’s declaration,
which contains assertions that a receptionist was often absent from Proven’s front
desk to check in visitors. (Lofrano Decl., ¶ 12.) At this juncture, the court must
liberally construe Defendants’ evidence, whereas it must strictly construe Proven’s.
(See Cohen v. Five Brooks Stable (2008) 159 Cal.App.4th 1476, 1483.) Liberally
construing the Lofrano Declaration, Defendants’ evidence supports a reasonable
inference that Proven did not adequately protect its confidential materials from outside
intruders and, therefore, that its materials were not trade secrets. Even if Proven’s
other evidence of its precautions makes the issue of its material’s qualification as trade
secrets a close question, the court must resolve all doubts in Defendants favor. (Id.
[citation omitted].) Accordingly, the motions must be denied.

UMF 15 through 20 provide further support for the conclusion that the motions must be
denied. By these UMFs, proven has attempted to demonstrate that it took additional
steps to protect its client information. These UMFs concern Proven’s use of
“Commission Payable Statements” in conjunction with Proven’s commission payments
to its producers. According to Proven, at or near the time it paid producers their
commissions, it issued Commission Payable Statements to identify the clients with
whom producers had interacted and whose business supported the commissions.
Thus, the Commission Payable Statements included confidential information such as
client names and renewal dates. (UMF 16.) Proven asserts that Commission Payable
Statements were e-mailed to producers with an attachment indicating that the
Commission Payable Statements could contain confidential information that producers
were required not to disclose or otherwise use. (UMF 17.)

Defendants, however, have produced Lofrano’s declaration, wherein he asserts that
he frequently received Commission Payable Statement by hand and without any
indication that the contents were proprietary or confidential. (See Lofrano Decl., ¶¶ 3,
7.) Defendants also point to the deposition testimony of fellow Proven producer
Wayne Seefeldt, who testified that (1) he received some Commission Payable
Statements by hand delivery and (2) the e-mail disclaimer that Proven characterizes
as intended to protect proprietary information was attached to all company e-mails, not
Commission Payable Statements in particular. (See Proven’s Evid., Exh. 15 at 58:6-
18.)

The court concludes that whether Proven took reasonable steps to protect proprietary
information inserted into Commission Payable Statements involves triable issues of
material fact. This reinforces the court’s other conclusions that whether such
information amounts to trade secrets likewise involves triable issues, and the motions
for summary adjudication must be denied accordingly.

The court notes that Proven is the one who has presented UMF 13 and UMF 15-20 as
facts material to the motions. That being the case, the court will not entertain any
contrary arguments on Proven’s part that these UMFs are somehow immaterial and,
therefore, that other UMFs establish that Proven took reasonable steps to protect its

confidential information as trade secrets. (See Nazir v. United Airlines, Inc. (2009) 178
Cal.App.4th 243, 252 [citing Weil & Brown, Civ. Proc. Before Trial, (Rutter 2011)
Ch.10:95.1]; see also Weil & Brown, Civ. Proc. Before Trial (Rutter 2012) Ch. 10:95.1
at 10-36].)

Because the court denies the motions for the reasons stated above, its does not
address the parties’ further arguments in support of and in opposition to the motions.

Defendants’ evidentiary objections and objections to Proven’s request for judicial
notice are OVERRULED.

Proven’s Evidentiary Objections Nos. 3-5 and 9-11 as to the Lofrano Declaration are
SUSTAINED. Proven’s other evidentiary objections to the Lofrano Declaration are
OVERRULED.

Proven’s Evidentiary Objection No. 2 to the Kachmar Declaration is SUSTAINED. Its
other objection to the Kachmar Declaration is OVERRULED.

Proven’s request for judicial notice of court documents is GRANTED. In taking judicial
notice of these documents, the court accepts the fact of their existence, not the truth of
th
their contents. (See Professional Engineers v. Dep’t of Transp. (1997) 15 Cal.4 543,
590 [judicial notice of findings of fact does not mean that those findings of fact are
true]; Steed v. Department of Consumer Affairs (2012) 204 Cal.App.4th 112, 120-121.)

The minute order is effective immediately. No formal order pursuant to CRC 3.1312 or
further notice is required.