Unigen Corporation v. Nickel Electronics LLC, et al.		CASE NO. 114CV264235
DATE: 7 November 2014	TIME: 9:00	LINE NUMBER: 10

This matter will be heard by the Honorable Judge Socrates Peter Manoukian in Department 19 in the Old Courthouse, 2nd Floor, 161 North First Street, San Jose.  Any party opposing the tentative ruling must call Department 19 at 408.808.6856 and the opposing party no later than 4:00 PM Thursday 6 November 2014.  Please specify the issue to be contested when calling the Court and counsel.

On 7 November 2014, the following motions were argued and submitted:

• the motion defendants Nickel Electronics, LLC, a California limited liability company (“Nickel California”), Nickel Electronics, LLC, a Delaware limited liability company (“Nickel Delaware”), and Robert Nicol (“Nicol,” collectively with Nickel California and Nickel Delaware, “Defendants”) to compel further responses to discovery and for monetary sanctions;
• the motion of plaintiff Unigen Corporation (“Unigen”) to compel further responses by Nicol to requests for production of documents and for monetary sanctions;
• Unigen’s motion to compel further responses by Nickel California to requests for production of documents and for monetary sanctions; and
• Unigen’s motion to compel further responses by Nickel Delaware to requests for production of documents and for monetary sanctions.

Unigen filed a formal opposition to Defendants’ motion, and Defendants filed a formal opposition to Unigen’s motions.

Also considered in as an add-on matter was

5)      Application of Plaintiff to file under seal to separate statements and certain exhibits in support of Defendants’          motion of Defendants.  No opposition was presented on this motion.  It’s

1. Statement of Facts

Unigen alleges that Nicol, its former employee, formed Nickel California and Nickel Delaware (collectively, the “Nickel Entities”) in order to start his own business in competition with Unigen.  Unigen alleges that Nicol solicited its customers for his own gain while still employed by Unigen and improperly collected and used its confidential and proprietary information, including its trade secrets.

In the operative first amended complaint (the “FAC”), Unigen asserts the following claims: (1) breach of contract (against Nicol); (2) breach of duty of undivided loyalty (against Nicol); (3) vicarious liability for breach of duty of undivided loyalty (against the Nickel Entities); (4) breach of the implied covenant of good faith and fair dealing (against Nicol); (5) intentional interference with contractual relationships (against the Nickel Entities); (6) misappropriation of trade secrets (against all Defendants); (7) unfair competition – statutory (against all Defendants); and (8) unjust enrichment (against all Defendants).

1. Discovery Dispute

On 13 May 2014, Defendants served Unigen with a first set of special interrogatories consisting of a single interrogatory (“SI no. 1”) and a first set of requests for production of documents consisting of a single request (“RPD no. 1”).  SI no. 1 asked Unigen to identify its trade secrets and provide additional information related thereto, while RPD no. 1 demanded the production of such trade secrets.  On 26 June 2014, after requesting and receiving an extension from Defendants of its time to respond, Unigen objected to both discovery requests, and, in response to SI no. 1, referred Defendants to its concurrently-served identification of trade secrets pursuant to Code of Civil Procedure (“CCP”) section 2019.210.

On 3 July 2014, Unigen propounded parallel sets of requests for production upon the Nickel Entities (the “Requests”) and a set of requests for production upon Nicol (the “Requests for Production”).

On 9 July 2014, Defendants’ counsel sent Unigen’s counsel a meet and confer letter detailing asserted inadequacies in Unigen’s trade secrets identification and objections to SI no. 1 and RPD no. 1.  The parties agreed that Unigen would produce a copy of its asserted trade secret by 1 August 2014, and Defendants’ deadline to file a motion to compel would be extended until 2 September 2014.  On 16 July 2014, Defendants served their first set of form interrogatories (the “FI”s), their second set of special interrogatories (“SI nos. 2-7”), and their second set of requests for production of documents (“RPD nos. 2-24”).

On 29 July 2014, Defendants served responses to the Requests and Requests for Production consisting entirely of objections, including an objection that Unigen’s discovery requests were premature because Unigen had not yet properly identified its trade secrets pursuant to CCP section 2019.210.

On 1 August 2014, Unigen served a supplemental response to RPD no. 1, in which it re-asserted its objections to the RPD, but stated that it would produce unprivileged responsive documents.  On 4 August 2014, Defendants served their third set of special interrogatories (“SI nos. 8-11”), seeking the same information requested by SI no. 1, but employing multiple interrogatories in an attempt to address Unigen’s objection that SI no. 1 was compound.

On 15 August 2014, the parties agreed to an extension of Defendants’ motion to compel deadlines until 2 October 2014 in order to facilitate Unigen’s continued document production.  On the same date, Unigen served responses to Defendants’ 16 July discovery requests that consisted of objections only.  Defendants’ counsel sent Unigen’s counsel a meet and confer letter outlining asserted deficiencies with these responses on 18 August 2014.  Counsel continued to meet and confer.  On 3 September 2014, Unigen made a document production, and on 4 September 2014, it provided supplemental responses to Defendants’ 16 July discovery requests, in which it both interposed objections and provided substantive responses.

On 5 September 2014, Unigen’s counsel sent Defendants’ counsel a meet and confer letter regarding Defendants’ discovery responses.  Defendants’ counsel responded the same day, stating that Defendants would not meet and confer on any objections until the CCP section 2019.210 objection had been resolved.  The parties continued to meet and confer concerning this objection and Defendants’ responses more generally, but could not come to agreement.

On 12 September 2014, Unigen filed its motions to compel further responses to the Requests and Requests for Production.

On 22 September 2014, as the parties continued to meet and confer, Unigen provided second supplemental responses to the 16 July requests, a second supplemental response to RPD no. 1 and supplemental responses to SI nos. 8-11.  The parties agreed to extend Defendants’ deadline to move to compel until 16 October 2014 and continued to meet and confer, but were not able to resolve a number of issues related to Unigen’s discovery responses.

On16 October 2014, Defendants filed their motion to compel further responses from Unigen.  On 27 October 2014, Defendants filed a single opposition to Unigen’s motions to compel, and Unigen filed an opposition to Defendants’ motion to compel.  Also on 27 October 2014, Unigen served supplemental responses to a number of the discovery requests at issue in Defendants’ motion, along with an amended trade secret designation.[1]  On 31 October 2014, Unigen filed reply papers in support of its motions and Defendants filed reply papers in support of their motion.

III.     Discussion

1. Legal Standards

A party propounding a request for production may move for an order compelling a further response if it deems that a statement of compliance is incomplete or an objection is without merit or too general.  (CCP, § 2031.310, subd. (a).)  The motion must set forth “specific facts showing good cause justifying the discovery sought by the demand.”  (CCP, § 2031.310, subd. (b)(1); Kirkland v. Super. Ct. (Guess? Inc.) (2002) 95 Cal.App.4th 92, 98.)  Good cause is established simply by a fact-specific showing of relevance.  (Kirkland v. Super. Ct., supra, 95 Cal.App.4th at p. 98.)  If good cause is shown, the burden shifts to the responding party to justify any objections.  (Id.)

A party propounding interrogatories may move for an order compelling a further response if that party deems an answer is evasive or incomplete or an objection is without merit or too general.  (CCP, § 2030.300, subd. (a).)  The statute does not require any showing of good cause for the serving and filing of interrogatories.  (Coy v. Super. Ct. (Wolcher, et al.) (1962) 58 Cal.2d 210, 220-221.)  If the motion is timely filed, the burden is on the responding party to justify any objections or failure to fully answer.  (Id.)

1. Defendants’ Motion

Defendants move to compel further responses to FI nos. 3.1, subpart (e), 4.1, 4.2, 7.1, 9.2, and 50.1, subparts (d)-(f); SI nos. 1, 3, and 8-10; and RPD nos. 1-24.  On 27 October 2014, Unigen served supplemental responses to each of these discovery requests.

1.             Unigen’s Supplemental Responses

In a situation where a supplemental response is served after a motion to compel further responses is filed, the court has substantial discretion to decide how to rule on the motion.  (See Sinaiko Healthcare Consulting, Inc. v. Pac. Healthcare Consultants (2007) 148 Cal.App.4th 390, 409.)  For example, the court might grant the motion if the supplemental response is not code-compliant, deny the motion as moot, take the matter off-calendar, or order the parties to meet and confer.  (Id.)

Here, Unigen’s counsel declares that supplemental responses were served to FI nos. 3.1, 7.1, 9.2, and 50.1; SI nos. 1, 3, and 8-10; and RPD nos. 2-20 and 22-24.  Defendants agree that supplemental responses to each of these discovery requests were provided.[2]  However, neither Unigen nor Defendants have provided the supplemental responses for the Court’s review.  Given that the supplemental responses may address some or all of the issues raised by Defendants, the Court will deem Defendants’ motion moot as to the responses that have been supplemented.  The parties should meet and confer regarding Unigen’s supplemental responses, and it is noted that Defendants may bring a motion to compel further responses with respect to the supplemental responses should those efforts prove unsuccessful.

Accordingly, Defendants’ motion is MOOT as to FI nos. 3.1, 7.1, 9.2, and 50.1; SI nos. 1, 3, and 8-10; and RPD nos. 2-20 and 22-24.

2. FI Nos. 4.1 and 4.2

Unigen did not provide any substantive responses to FI nos. 4.1 and 4.2, which seek information regarding its insurance coverage related to this action.  Unigen also objected to these FIs, including on the basis that they seek irrelevant information.  In its opposition, Unigen defends its relevance objections, arguing that because it is the plaintiff in this action, evidence of its insurance coverage is inadmissible under the collateral source rule.  In their moving papers, Defendants cite a treatise for the proposition that Unigen’s insurance information is relevant.  However, the treatise simply discusses the Official Form Interrogatories in general terms, and does not address whether FI nos. 4.1 and 4.2 seek information that is relevant with respect to a plaintiff rather than a defendant.  In their reply papers, Defendants contend that this information is relevant to the issue of damages, because it will show whether and in what amount Unigen tendered a claim to its insurance carrier.

Discovery is allowed for any matters that are not privileged, relevant to the subject matter involved in the action, and reasonably calculated to lead to the discovery of admissible evidence.  (CCP, § 2017.010.)  The “relevance to the subject matter” and “reasonably calculated to lead to discovery of admissible evidence” standards are applied liberally with any doubt generally resolved in favor of discovery.  (Colonial Life & Acc. Ins. Co. v. Super. Ct. (Perry) (1982) 31 Cal.3d 785, 790.)  Moreover, for discovery purposes, information is “relevant to the subject matter” if it might reasonably assist a party in evaluating the case, preparing for trial, or facilitating settlement thereof.  (Gonzalez v. Super. Ct. (1995) 33 Cal.App.4th 1539, 1546.)

Pursuant to CCP section 2017.210, a party may obtain discovery of the existence and contents of any agreement under which any insurance carrier may be liable to satisfy in whole or in part a judgment that may be entered in the action or to indemnify or reimburse for payments made to satisfy the judgment.  (CCP, § 2017.210; Irvington-Moore, Inc. v. Super. Ct. (Jordan), 14 Cal.App.4th 733.)  This provision, however, applies to insurance held by defendants who may be liable to satisfy a judgment, not to insurance held by plaintiffs against whom no judgment is sought.  As urged by Unigen, a plaintiff’s insurance information is generally not admissible.  (See Arambula v. Wells (1999) 72 Cal.App.4th 1006, 1015 [“The collateral source rule … precludes the introduction of evidence of the plaintiff being compensated by a collateral source unless there is a ‘persuasive showing’ that such evidence is of ‘substantial probative value’ for purposes other than reducing damages.”].)  Further, Defendants’ argument that the FIs will reveal whether and in what amount Unigen filed an insurance claim lacks merit given that the FIs seek information related to Unigen’s insurance coverage and not to any insurance claim.  Consequently, Unigen’s relevance objections to FI nos. 4.1 and 4.2 are sustained, and further responses to these FIs are unwarranted.  The Court need not address Unigen’s remaining objections to these FIs in light of this ruling.

In light of the above, Defendants’ motion is DENIED with respect to FI nos. 4.1 and 4.2.

3. RPD No. 1

RPD no. 1. asks Unigen to produce any and all trade secrets that it contends any of the Defendants misappropriated from it.  There is good cause for this discovery given that it pertains to one of the central issues in dispute in this litigation.  Unigen responded by interposing objections and stating, “Please see documents produced as U0454-U0548 and U0596-U1177.  Plaintiff reserves the right to supplement this response as necessary.”  Defendants contend that Unigen’s objections to this RPD lack merit and its statement of compliance is improper.

Unigen does not indicate that it has provided a supplemental response to RPD no. 1, and does not defend its objections thereto or otherwise address this RPD in its opposition papers.  Unigen’s undefended objections to RPD no. 1 are therefore overruled, with the exception of its objections based on the attorney-client privilege and work product doctrine, which are preserved.  (See Best Products, Inc. v. Super. Ct. (Granatelli Motorsports, Inc.) (2004) 119 Cal.App.4th 1181, 1188-1189 [holding that where a defendant asserted the attorney-client and work product privileges in a timely manner, albeit in a boilerplate fashion, the trial court erred in finding a waiver of the privileges].)  In addition, a further substantive response to RPD no. 1 is warranted as Unigen’s statement of compliance does not meet the requirements of CCP section 2031.220, which provides that a statement of compliance shall indicate that all responsive documents “in the possession, custody, or control” of the responding party will be produced.

Consequently, Defendants’ motion is GRANTED with respect to RPD no. 1.

4. RPD No. 21

RPD no. 21 seeks any communications with Unigen’s employees between February 1, 2007 and August 17, 2012 relating to the confidentiality or purported confidentiality of any of Unigen’s information.  Unigen responded to this RPD by resting upon objections.  In its opposition papers, Unigen indicates that counsel for Defendants agreed to limit this request to any of Unigen’s information that it claims is a trade secret.

Defendants contend that this information is relevant to this issue of whether Unigen took reasonable steps to protect its asserted trade secrets, and to its specific claims that it maintained the confidentiality of trade secrets by providing certain instructions to its employees and requiring its employees to sign confidentiality agreements.  These arguments establish good cause for the production of the information requested, if limited to information that Unigen actually claims is a trade secret pursuant to the parties’ agreement.  Consequently, the Court finds that there is good cause for the discovery sought by RPD no. 21 as limited by the parties.

In its opposition, Unigen defends its objection that RPD no. 21 is overbroad by discussing the difficulty of performing a search for the requested communications.  While it is noted that this argument pertains to an objection that the RPD is unduly burdensome rather than overly broad, the Court will consider it given that Unigen did raise an objection on the basis of burden in its response to RPD no. 21.

“[S]ome burden is inherent in all demands for discovery.”  (West Pico Furniture Co. v. Super. Ct. (Pacific Finance Loans) (1961) 56 Cal.2d 407, 418.)  A party claiming that requested discovery is unduly burdensome must make a particularized showing of facts demonstrating hardship.  (Id. at pp. 417-418.)  In ruling on the objection, the court should balance the purpose and need for the information against the burden that production entails, including costs.  (Id.)

Unigen submits a declaration by its Vice President, Simon Ip, who states that most of Unigen’s hundreds of employees were issued a company e-mail address “with its own separate account.”  (Decl. of Simon Ip ISO Opp., ¶ 4.)  Unigen has to search these accounts “manually.”  (Id. at ¶ 5.)  Mr. Ip states that Unigen’s employees are instructed to label emails with confidentiality notices, and do so with respect to a vast number of communications, “rang[ing] into high six-figure numbers,” that will consequently be encompassed by Defendants’ request.  (Id. at ¶¶ 6-7.)  However, Mr. Ip does not explain what a “manual” search of employee emails entails or provide any estimate of the time and costs involved.  Consequently, Unigen has failed to make the particularized showing necessary to justify its objection as to burden.

Finally, Unigen asserts that, because it does business outside of the re-marketing and pre-owned memory products context that is relevant to this dispute with a number of its customers in that space, RPD no. 21 encompasses a large amount of irrelevant information.  However, as discussed, the parties have limited RPD no. 21 to address information that Unigen claims is a trade secret, and it consequently does not encompass information about customers in other contexts.  To the extent that Unigen implies that RPD no. 1 is overly burdensome because it is unable to isolate customer information from the relevant context, Unigen has not made the particularized showing necessary to support such an argument.

Unigen’s objections as to overbreadth and burden are consequently overruled.  Unigen’s undefended objections to RPD no. 21 are also overruled, with the exception of its objections based on the attorney-client privilege and work product doctrine, which are preserved.  (See Best Products, Inc. v. Super. Ct., supra, 119 Cal.App.4th at pp. 1188-1189.)  A further response to RPD no. 21 is thus warranted.

In light of the above, Defendants’ motion is GRANTED as to RPD no. 21.

1. Unigen’s Motions

Unigen moves to compel further responses to Request nos. 1-9 and 11-27 and Request for Production nos. 1-9 and 11-18.  Defendants objected to these requests on the basis that, inter alia, Unigen must adequately identify its alleged trade secrets before it is entitled to proceed with discovery.

1. Adequacy of Unigen’s Trade Secret Designation

“A trade secret is ‘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.’” (Perlan Therapeutics, Inc. v. Super. Ct. (NexBio, Inc.) (2009) 178 Cal.App.4th 1333, 1342-1343, quoting Civ. Code, § 3426.1, subd. (d)(1) and (2).)  In an action alleging the misappropriation of a trade secret, the party alleging the misappropriation must identify the trade secret with reasonable particularity before commencing discovery related thereto.  (CCP, § 2019.210.)  The pre-discovery designation serves four purposes: (1) it promotes well-investigated claims and dissuades the filing of meritless trade secret complaints, (2) it prevents plaintiffs from using the discovery process as a means to obtain defendants’ trade secrets, (3) it assists the court in framing the appropriate scope of discovery and determining whether the plaintiff’s discovery requests fall within that scope, and (4) it enables defendants to form complete and well-reasoned defenses, ensuring that they need not wait until the eve of trial to effectively defend against charges of trade secret misappropriation.  (Perlan Therapeutics, Inc. v. Super. Ct., supra, 178 Cal.App.4th at p. 1343.)

A trade secret must be identified with sufficient particularity to distinguish it from matters of general knowledge in the trade or special knowledge of those persons who are skilled in the trade.  (Advanced Modular Sputtering, Inc. v. Super. Ct. (Mishin, et al.) (2005) 132 Cal.App.4th 826, 835.)  However, reasonable particularity does not require the party alleging misappropriation to define every minute detail of its claimed trade secret.  (Id.)  Rather, it requires some showing that is “reasonable, i.e., fair, proper, just and rational under all of the circumstances” to advance the underlying purposes of the designation, as set forth above.  (Id. at pp. 835-836.)  Section 2019.210 requires only the identification of trade secrets.  (Brescia v. Angelin (2009) 172 Cal.App.4th 133, 149.)  It does not compel the provision of argument or evidence demonstrating that the identified trade secrets actually qualify as such, and it “does not create a procedural device to litigate the ultimate merits of the case.”  (Id.)

Here, Unigen identifies the following trade secrets: (1) the identities of its past and current customers and (2) the most potentially lucrative customers from that group (Ex. 7 to Defendants’ Mot., Unigen’s Identification of Trade Secrets, ¶ A(1)-(2)); (3) information regarding these customers, “including” a number of specified categories of information (id. at ¶ A(3)); (4) information regarding Unigen’s suppliers and/or vendors, “including” a number of categories of information (id. at ¶ A(4)); and (5) “internal information, including customer contracts, invoices and purchase orders” (id. ¶ A(5)).[3]

The first two categories are reasonably particularized and may qualify as trade secrets.  (See The Retirement Group v. Galante (2009) 76 Cal.App.4th 1226, 1238 [“Numerous courts have concluded customer lists can qualify for trade secret protection.”].)  With respect to the third and fourth categories, specific information relating to customers and other business partners may also qualify as a trade secret.  (See San Jose Constr. Inc. v. S.B.C.C., Inc. (2007) 155 Cal.App.4th 1528, 1538 [there were triable issues of fact as to whether compilation of subcontractor contact lists, project and budget proposals, and cost estimates constituted trade secrets]; Whyte v. Schlage Lock Co. (2002) 101 Cal.App.4th 1443, 1455-1456 [information related to cost and pricing and marketing strategy and plans may constitute trade secrets].)  Here, however, Unigen has failed to define the information it claims as trade secrets, because it qualifies the specific categories of information provided with a general statement that its trade secrets “includ[e]” such information.  (See Perlan Therapeutics, Inc. v. Super. Ct., supra, 178 Cal.App.4th at p. 1350) [a trade secret plaintiff is “not entitled to include broad, ‘catch-all’ language as a tactic to preserve an unrestricted, unilateral right to subsequently amend its trade secret statement”].)  In addition, the fifth category, “internal information,” could be understood to encompass virtually all information in Unigen’s possession and does not provide any boundaries to Unigen’s claims.  This generic category swallows the first four categories and renders Unigen’s designation as a whole inadequate.

The Court thus finds that Unigen’s trade secret designation is inadequate.  Consequently, Unigen is not entitled to proceed with discovery related to its asserted trade secrets at this time.

2.             The Nature of the Discovery Requests at Issue

Unigen contends that, even if its trade secret designation is not adequate, it is entitled to proceed with discovery related to subjects other than its trade secrets.

CCP section 2019.210 applies not only to misappropriation causes of action, but also to any cause of action that is “factually dependent on the misappropriation allegation.”  (Advanced Modular Sputtering, Inc. v. Super. Ct., supra, 132 Cal.App.4th 826, 834-835.)  While no published opinion has decided the issue, courts have suggested that discovery unrelated to the alleged trade secrets may proceed where there are causes of action that are not dependant upon the allegations of misappropriation.  (See id.; Perlan Therapeutics, Inc. v. Super. Ct., supra, 178 Cal.App.4th at pp. 1337-1338, fn. 2.)

Here, Unigen’s claims for breach of contract, breach of duty of undivided loyalty, breach of the implied covenant of good faith and fair dealing, unfair competition, and unjust enrichment arise from both Unigen’s misappropriation allegations as well as its allegations that Defendants competed with Unigen while Nicol was still employed there.  While Unigen argues that the second theory is unrelated to the first, it would be impossible as a practical matter to pursue discovery related to Defendants’ alleged competition with Unigen without sweeping up information related to Unigen’s alleged trade secrets, namely, customer, supplier, and vendor information.

A review of the document requests at issue confirms that the vast majority of them encompass customer, supplier, or vendor information, although some are more broadly worded or facially focused on the time period of Nicol’s employment and the Nickel Entities’ formation.  These requests relate to Nickol’s communications with Unigen’s customers, vendors, or brokers (Request for Production nos. 17-18); the first day the Nickel Entities began providing services (Request nos. 11 and Request for Production nos. 14 and 16); and the Nickel Entities’ compensation invoiced, earned, or received (Request nos. 4 and Request for Production no. 4), payments to and by others for services related to the re-marketing of memory products (Request nos. 5-6 and Request for Production nos. 5-6 and 11-12) and wiping of used memory products (Request nos. 7), communications regarding Unigen’s customers (Request nos. 8-9), and vendors and customers of their own (Request nos. 12–26 and Request for Production nos. 13 and 15).  A few general requests do not encompass customer, supplier, or vendor information, but nevertheless pertain equally to both of Unigen’s theories in this action.[4]

Given that Unigen’s alternate theory of recovery is so closely related to its allegations of trade secret misappropriation, discovery cannot proceed on the alternate theory alone as a practical matter.  Consequently, Unigen’s motions are DENIED in their entireties due to Unigen’s inadequate trade secret designation.

1. Plaintiff’s Motion to Seal Separate Statement and Certain Exhibits, Etc.

Plaintiff makes a motion to file under seal the separate statement, and certain exhibits that Defendants used in support of Defendants’ Motion to Compel Further Responses.  Plaintiff wishes to seal the following documents, which Defendants lodged under seal in accordance with the stipulated protective order:  Exhibits 29, 30, 32, 34, 38, 39, and Defendant’s Separate Statement.  Plaintiff’s motion is code compliant.  In support of the motion, Plaintiff cites California Rules of Court 2.550-2.551.

A party may not file a record under seal without a court order. (Cal. Rules of Court, rule 2.551(a).) California Rules of Court, rule 2.551(b) requires that the party seeking to file documents under seal must file a motion that contains a notice of motion, memorandum of points and authorities, and a declaration containing facts sufficient to justify the sealing. A court has the authority to order that a record be filed under seal only if it expressly finds facts that establish (1) there exists an overriding interest that overcomes the right of public access to the record; (2) the overriding interest supports sealing the record; (3) a substantial probability exists that the overriding interest will be prejudiced if the record is not sealed; (4) the proposed sealing is narrowly tailored; and (5) no less restrictive means exist to achieve the overriding interest. (Cal. Rules of Court, rule 2.550(d).)

The California Rules of Court expressly indicate that the sealing rules do not apply to discovery motions, or records filed and lodged in connection with discovery motions. (Cal. Rules of Court, rule 2.550(a)(3).) The rules do apply to discovery materials that are used at trial or submitted as a basis for adjudication of matters other than discovery proceedings. (Id.)

However, the Sixth Appellate District, in dicta, has interpreted the discovery exemption contained in the California Rules of Court as not precluding all discovery motions from the sealing requirements, but imposing a less strict set of requirements than those in the rules of court. (H.B. Fuller Co. v. Doe (2007) 151 Cal.App.4th 879, 891-894 (“Fuller”).) The plaintiff in Fuller asserted that the rules of court did not apply, because the motion at issue was a discovery proceeding and was expressly exempted. (Id. at p. 892.) The court addressed the dangers of applying a categorical exemption of the sealing rules to all discovery motions. The court found it “absurd” to require “the moving party to expose the materials to public view, or to prove that there is an overriding interest against their disclosure” for routine discovery motions involving the “quintessentially procedural question of whether and under what conditions the materials must be produced in discovery.” (Id. at p. 893.)

The court found that the strict sealing rules were more appropriate for discovery motions that were “not merely ancillary or preliminary to some larger litigation, but [are] the whole end and purpose of the case,” and that involved questions of great significance to the public. (Ibid.) The Fuller court ultimately did not decide the discovery exemption issue because the court found no substantial basis for maintaining the documents at issue under seal. (Id. at p. 894.)

Generally the only matters that should be sealed are the actual trade secrets.  This Court does not recall an instance where a Separate Statement was filed under seal but, as the old country western song goes, there is a first time for everything.  This Court believes that the separate statement barely complies with the requirements to seal documents in a court file which is presumptively open to public inspection.

Here, Plaintiff has filed a code complaint motion to seal.  Plaintiff’s motion is accompanied by a memorandum of points and authorities, and declaration setting forth sufficient facts to justify a sealing.

Plaintiff also fulfills the requirements of Cal. Rule of Court 2.550(d). First, Plaintiff is correct in arguing that there is an overriding public interest in the protection of trade secrets, and that courts have consistently held customer information constitutes a trade secret under California law.  Second, Plaintiff would be prejudiced if confidential information regarding customers and suppliers were to be made public.  Third, the Court agrees that this motion to seal is narrowly tailored, sealing no more than is necessary to achieve the overriding interest in maintaining the protection of trade secrets.

Therefore, Plaintiff’s Application to File Under Seal The Separate Statement and Certain Exhibits in Support of Defendants’ Motion to Compel Further Responses to Discovery And For Sanctions That Were Lodged Conditionally Under Seal is GRANTED.

1. Requests for Monetary Sanctions

A court’s authority to award monetary sanctions arises from statutory authority, and not from the court’s own inherent authority.  (Trans-Action Commercial Investors, Ltd. v. Firmaterr (Jelinek) (1997) 60 Cal.App.4th 352, 366.)  This authority is restricted because the Legislature has seen fit to establish such limitations.  (Jelinek, 60 Cal.App.4th at 371; Bauguess v. Paine (1978) 22 Cal.3d 626, 638-39. )

Code of Civil Procedure, § 2023.040 states:

“A request for a sanction shall, in the notice of motion, identify every person, party, and attorney against whom the sanction is sought, and specify the type of sanction sought. The notice of motion shall be supported by a memorandum of points and authorities, and accompanied by a declaration setting forth facts supporting the amount of any monetary sanction sought.”

The party must cite to the statutory authority that awards sanctions for a particular discovery method (e.g., Cal. Code Civ. Proc. 2030.290, 2031.310, etc.; See Quantum Cooking Concepts, Inc. v. LV Assoc., Inc. (2011) 197 Cal.App.4th 927, 934.)

1. Defendants’ Request

Defendants make a code-compliant request for monetary sanctions against Unigen pursuant to CCP sections 2023.010-040, 2030.300, subdivision (d), and 2031.310, subdivision (h).

Sections 2030.300, subdivision (d) and 2031.310, subdivision (h) provide that the court shall impose a monetary sanction against any party or attorney who unsuccessfully opposes a motion to compel further responses to interrogatories and demands for inspection, respectively, unless he or she acted with substantial justification or other circumstances make the imposition of the sanction unjust.  Here, Defendants’ motion is largely moot because Unigen served further responses.  While the Court has discretion to award sanctions in this situation (Cal. Rules of Court, Rule 3.1348(a); see also Sinaiko Healthcare Consulting, Inc. v. Pac. Healthcare Consultants, supra 148 Cal.App.4th at 409), Unigen’s opposition was also partially successful, and the Court finds that it would be unjust to award sanctions under the circumstances.

CCP section 2023.010 does not itself set forth any provisions regarding the issuance of a monetary sanction, but merely defines certain actions as misuses of the discovery process. CCP section 2023.030 provides that sanctions may be imposed for misuses of the discovery process “[t]o the extent authorized by the chapter governing any particular discovery method or any other provision of this title.”  “This means that the statutes governing the particular discovery methods limit the permissible sanctions to those sanctions provided under the applicable governing statutes.”  (New Albertsons, Inc. v. Super. Ct. (Shanahan) (2008) 168 Cal.App.4th 1403, 1422.)

Here, the only statutes governing a particular discovery method that Defendants cite in support of their request are CCP sections 2030.300, subdivision (d) and 2031.310, subdivision (h), which, as discussed above, do not support an award of sanctions under the circumstances.  Similarly, CCP section 2023.040 sets forth the information required to be included in a request for sanctions and does not itself provide a basis for sanctions.

Finally, section 2023.020 provides that the court shall impose a monetary sanction against any party or attorney who “fails to confer as required,” notwithstanding the outcome of a particular discovery motion.  Defendants do not discuss their request pursuant to this section in their memorandum of points and authorities or reply brief, and do not submit any authority indicating that a party opposing a motion to compel further responses must meet and confer.  (Cf. CCP, §§ 2030.300, subd. (b), 2031.310, subd. (b) [moving party must provide a meet and confer declaration].)  Thus, this section does not provide a basis for monetary sanctions.

Defendants’ request for monetary sanctions is consequently DENIED.

2. Unigen’s Requests

In each of its notices of motion, Unigen makes a code-compliant request for monetary sanctions pursuant to CCP section 2023.030.  As discussed above, this section does not provide an independent basis for the award of sanctions.  In its memorandum of points and authorities, Unigen also seeks sanctions pursuant to CCP section 2031.310, subdivision (h).  Given that Defendants’ opposition to Unigen’s motions was successful, however, the award of sanctions is not authorized by this section.

Unigen’s requests for monetary sanctions are accordingly DENIED.

1. Conclusion and Order

Defendants’ motion is MOOT as to FI nos. 3.1, 7.1, 9.2, and 50.1; SI nos. 1, 3, and 8-10; and RPD nos. 2-20 and 22-24.  The motion is DENIED with respect to FI nos. 4.1 and 4.2, and GRANTED with respect to RPD nos. 1 and 21.

Unigen shall serve verified, code-compliant further responses to RPD nos. 1 and 21, without objections (except for attorney-client privilege and attorney work product doctrine, which have been preserved) and produce all responsive documents in conformity therewith within 20 calendar days of the filing of this Order.  To the extent that Unigen withholds documents based upon the attorney-client privilege and/or work product doctrine, it shall provide Defendants with a privilege log identifying the documents withheld and providing a factual basis for the privilege claimed.

Unigen’s motions are DENIED.

Defendants’ request for monetary sanctions is DENIED.

Unigen’s requests for monetary sanctions are DENIED.

 

 

________________­­­____________ DATED:

_________________________­­­________________________ HON. SOCRATES PETER MANOUKIAN Judge of the Superior Court County of Santa Clara

[1] Unigen’s supplemental responses and amended trade secret designation have not been provided to the Court.

[2] While Defendants stated in their reply papers that no supplemental response to FI no. 50.1 was served, they filed supplemental reply papers indicating that their statement was based on a printing error, and a supplemental response to FI no. 50.1 was in fact served.

[3] The declarations filed in support of the parties’ reply papers indicate that Unigen provided an amended trade secret designation along with its supplemental discovery responses served on 27 October 2014.  The amended designation has not been provided for the Court’s review, and Unigen does not address the amended designation in its reply memorandum, but rather continues to defend its initial trade secret designation.

Under the circumstances, the Court will address the initial trade secret designation, since this designation was in effect when Unigen propounded the discovery at issue (see CCP, § 2019.210 [designation must be made “before commencing discovery relating to the trade secret,” italics added]) and Unigen does not argue that the amended designation is relevant to its motions.

[4] These are the requests relating to the formation, registration, and corporate structure of the Nickel Entities (Request nos. 1-2 and Request for Production nos. 1-2 and 7-8) and the compensation of individuals affiliated with those entities (Request no. 3 and Request for Production nos. 3 and 9).