Case Number: BC524237    Hearing Date: July 15, 2014    Dept: SEC

TORRES-MEDINA v. VALLEY VIEW DRUGS, INC.
CASE NO.: BC524237
HEARING: 07/15/14

#1
TENTATIVE ORDER

I. & II. Cross-defendants ROSEMARY TORRES-MEDINA, GEORGIANA PETCU, JACQUELINE ELLIOT, AMPARO BATISTE, JAMES BELL and
PROFESSIONAL COMPOUNDING PHARMACY’s demurrer to the
First Amended Cross-Complaint (FAXC) is SUSTAINED WITH 15
DAYS LEAVE TO AMEND.

The motion to strike is GRANTED WITH 15 DAYS LEAVE TO AMEND.

C.C.P. §§ 430.10(e), 435, 436.

In the FAXC, cross-complainant VALLEY VIEW DRUGS asserts causes of action for misappropriation, unfair competition, interference with prospective economic advantage and conversion. Cross-complainants demur only to the unfair business practices (2nd) cause of action, on the ground that cross-complainant improperly seeks damages not permissible under Business and Professions Code section 17204. See Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134. The motion to strike is brought on the same ground.

Cross-complainant argues that the demurrer and motion to strike were filed after the time permitted to respond to the pleading. It is correct that untimely pleadings can be stricken upon motion. See C.C.P. § 436. Cross-complainant did not seek default or bring a motion to strike; it elected to respond to the substance of the demurrer and cross-defendants’ motion. The Court elects to hear the motions presented on the merits.

Cross-defendant James Bell was an independent contractor who provided delivery services to Valley View. FAXC, ¶ 8. He is also the principal of cross-defendant Professional Compounding Pharmacy. ¶9. The individual cross-defendants are Valley View’s former employees who allegedly have a financial interest in the pharmacy. ¶¶7, 11.

The Pharmacy was established in July 2013. FAXC, ¶20. The individual cross-defendants allegedly misappropriated from Valley View confidential information including marketing materials, client lists, etc. ¶25. Valley View contends that the Pharmacy’s use of such confidential information constitutes an unfair business practice. It seeks injunctive relief, and disgorgement of profits and of “the value of assets improperly and unlawfully retained.” ¶¶43, 44. In the prayer for relief, cross-complainant seek an order to restore to it “all funds acquired by means of any act or practice declared…to be unlawful or fraudulent.” FAXC, Prayer, ¶2(c).

Cross-defendants argue that the disgorgement claim is actually one for compensatory damages, which are not recoverable. Korea Supply, supra; Bank of the West v. Superior Court (1992) 2 Cal.4th 1254. They contend that Valley View cannot recover the monies earned by the Pharmacy from its former customers.

Here, Valley View is alleging (among other things) that Pharmacy refilled the prescriptions of Valley View customers without permission, FAXC, ¶28. It argues that Pharmacy submitted the insurance claims prior to Valley View, which had also filled the prescriptions, and thus precluded it from obtaining reimbursement. That is not alleged in the pleading. The Court finds that cross-complainant’s allegations of restitution are insufficient, as the basis for such is not pled. See generally Cortez v. Purolator Air Filtration Prod. Co. (2000) 23 Cal.4th 163. Cross-complainant should ensure that it seeks remedies allowable by the unfair competition statutes, and that it alleges a factual basis for the relief sought. Leave to amend is granted.

II. Cross-complainant VALLEY VIEW DRUGS’s motion to
compel further responses to special interrogatories (set one)
is GRANTED. C.C.P. § 2031.300.

II. Cross-complainant VALLEY VIEW DRUGS’s motion to
compel further responses to demands for production (set one)
GRANTED. C.C.P. § 2031.310.

Cross-defendant PROFESSIONAL COMPOUNDING PHARMACY is ORDERED to serve further responses, in accordance with this order, no later than July 29, 2014.

The subject discovery was propounded in March 2014. Motions, Exh. C. In April, cross-defendant Professional Compound Pharmacy served objections in response. Exh. D. Counsel thereafter engaged in meet and confer, but were unable to resolve the discovery disputes. See Exh. E through I. These motions followed.

Service of discovery requests
Cross-defendant was served with the summons in December 2013. The subject discovery was served on the Law Offices of Mike Walsh in March 2014. Cross-defendant argues that because Pharmacy had not yet appeared in the action, it was improper to serve counsel. See C.C.P. § 1014. Counsel also contends that he was not retained until April 2014.

However, in December 2013, attorney Walsh responded to cross-complainant’s cease and desist letter on behalf of Pharmacy. See Motion, Exh. K. In his letter, he instructed cross-complaint not to communicate directly with Pharmacy. In December or January, Walsh requested an extension of time to respond to the cross-complaint on behalf of Pharmacy. Exh. M. The extension was granted with the understanding that Walsh was representing Pharmacy.

Based on counsel’s prior actions on behalf of Pharmacy, his objection to service of the discovery on counsel is overruled.

Disclosure of trade secrets
Under Code of Civil Procedure section 2019.210, a party who is alleging misappropriation of a trade secret must, before commencing discovery, “identify the trade secret with reasonable particularity,” subject to any orders under Civil Code section 3426.5 related to the preservation of secrecy of such trade secrets.

Cross-complainant contends that the trade secrets were disclosed in its November 2013 cease and desist letter. Motion, Exh. J. In June 2014, it also provided cross-defendant with a Trade Secret Disclosure Statement, which specified the date the formulas were on cross-defendant’s website and describing the information. Exh. L.

Cross-complainant also references Exhibits A and B, which consist of confidential marketing materials and a copy of Pharmacy’s website as it appeared in November 2013. The documents are not attached to the motion because cross-complainant seeks an in camera review at the time of the hearing. (As an aside, the Court notes that it also references a Motion to Seal, although it does not appear that any such motion has been filed). The Court will hear oral argument as to whether an in camera review is appropriate and/or necessary.

Cross-defendant properly objects to the March 2014 service of the discovery prior to the trade secret disclosure, in violation of the statute. Cross-complainant’s delay in serving the disclosure statement appears to have been due to counsel’s drafting and negotiating a suitable protective order. Cross-complainant served the first draft of the stipulation in January 2014, well before the discovery was propounded. There was delay in obtaining draft versions from cross-defendant and a delay in filing the document with the Court. In an event, requiring cross-complainant to re-serve the discovery would serve no useful purpose.

Cross-complainant argues that those disclosures identified the trade secrets with the requisite particularity. See Brescia v. Angelin (2009) 172 Cal.App.4th 133 (citing Advanced Modular Sputtering, Inc. v. Superior Court (2005) 132 Cal.App.4th 826).

As noted in Brescia, reasonable doubts regarding the adequacy of the disclosure under section 2019.210 should be resolved in favor of allowing discovery. The Court finds that the Disclosure Statement adequately sets forth the alleged trade secrets with reasonable particularity to allow cross-defendant to respond to the allegations. Perlan Therapeutics, Inc. v. Superior Curt (2008) 178 Cal.App.4th 1333.

Other objections
Cross-defendant has the burden of justifying its other objections to the discovery. Coy v. Superior Court (1962) 58 Cal.2d 210.

Cross-defendant objected on the ground that responses would violate its own trade secrets. The parties have entered into a stipulated protective order, signed by the Court on May 13, 2014 (after the objections were asserted). The Court assumes the agreement was drafted to protect both parties’ interests in their alleged trade secrets.

With respect to the discovery seeking third parties’ prescription information, that information is directly relevant to the alleged misappropriation. Any responses are subject to the stipulated protective order, so the objections on that ground are overruled.

Cross-defendant’s objections to the form of the discovery requests are also overruled. To the extent the queries are “vague” or lack definitions, any lack of clarity could easily be resolved during meet and confer. The requests are not objectionable as disjunctive insofar as each seeks information regarding a single subject. See Clement v. Algre (2009) 177 Cal.App.4th 1277. A party has an obligation to respond to discovery to the extent it is possible. See Regency Health Services, Inc. v. Superior Court (1998) 64 Cal.App.4th 1496. Cross-defendant made no effort to provide any responses.

Cross-defendant’s privacy objections to the demands for production which request the entirety of the individual cross-defendant’s employment files are well-taken. Request Nos. 2 through 5. Cross-complainant’s arguments pertaining to trade secret disclosure do not adequately address the individual’s right to privacy in their personnel information. BRV, Inc. v. Sup. Ct. (2006) 143 Cal. App. 4th 742, 756. The motion is denied as to those items.

As to the other items, cross-defendant did not file responsive separate statements setting forth their arguments against providing further responses, nor are the individual discovery requests addressed with any detail in the oppositions. The Court has reviewed the separate statements and, except as noted above, orders further responses.