Opinion
NOT TO BE PUBLISHED
Santa Cruz County Super. Ct. No. CV150025
RUSHING, P.J.
Respondent Bob Brown is an employee of Western States Oil (WSO), a fuel and lubricant manufacturer and distributer. In years past, WSO used appellant Augeas Corporation (Augeas), to perform state-required environmental investigation at its various properties in California. The instant case arises out of WSO’s 2004 decision to replace Augeas with Allterra Environmental (Allterra), a company created by former employees of Augeas. In Brown’s role at WSO, he had occasion to work with representatives of both Augeas and Allterra. Augeas filed suit against Brown, alleging, among other things, that Brown misappropriated its trade secrets, and engaged in unfair business practices in connection with WSO’s decision to cease its business with Augeas. The trial court granted Brown’s motion for summary judgment, and awarded Brown $194,990.25 in attorney fees under Civil Code section 3426.4, based on its finding that Augeas brought the action against Brown for misappropriation of trade secrets in bad faith.
In these two consolidated appeals, Augeas seeks reversal of the trial court’s grant of Brown’s motion for summary judgment and motion for attorney fees.
Statement of the Facts and Case
Brown is an employee of Tom Lopes Distributing, Inc., which does business as WSO, and has been employed there since 1981. Brown’s job responsibilities at WSO included responding to the State of California regarding possible environmental contamination at WSO properties. In July 1992, WSO hired Augeas to provide environmental consulting services, and Brown, as an employee of WSO, began working closely with Augeas to review the possible environmental contamination at WSO’s properties.
Up until February 2004, James Allen was the project manager at Augeas for work done for WSO. James Allen and Brown spoke on a regular basis regarding the work, but in February 2004, when Brown called Augeas, he could no longer reach James Allen. Eventually, Brown learned from another Augeas employee, Nathaniel Allen, James’s brother, that James had quit his job and would no longer be handling the Augeas work for WSO. Nathaniel became Augeas’s new project manager handling the WSO work until he also quit Augeas in April 2004. After the Allen brothers left the employment of Augeas, they formed a company called Allterra Environmental (Allterra) that performed environmental services similar to Augeas.
James Allen and Nathaniel Allen are the defendants in another, nearly identical lawsuit filed by Augeas. In that case, a court trial resulted in a defense verdict as to all causes of action. The judgment is the subject of an appeal to this court in case numbers H031423 and H032156.
In March 2004, Brown was managing the environmental investigation and cleanup at the WSO site located at 498 South 4th Street in San Jose. At the time, Augeas was performing the on-site environmental work for the 4th Street property, and Brown was working with the Augeas project manager.
In managing the 4th Street environmental investigation, Brown determined that WSO needed off-site monitoring, in addition to the on-site monitoring provided by Augeas. Brown sought a bid for the off-site monitoring from Walter Hayes Company of Gilroy, California, as well as Augeas. In addition, Brown told Nathaniel Allen that WSO was accepting bids for the off-site work, and Allterra also submitted a bid. The Allterra bid was the lowest in price, and Brown decided to chose Allterra to perform the off-site work.
In Fall of 2004, WSO, without Brown’s input, made the decision to stop using Augeas for its environmental work, and to hire Allterra instead.
As a result of WSO’s decision to hire Allterra to do its environmental investigative work, Augeas filed suit. In the original complaint, Augeas sued its former employees Gregory Nolan, Jonathon Lear, and their companies Nolan Technical Services, and Allterra. Brown became a defendant in this action in September 2005, when Augeas amended its complaint to add him as a “doe” defendant. When Augeas added Brown, it did not change the allegations in the complaint, instead adding Brown to all existing causes of action alleged in the complaint.
The instant case arises out of a lawsuit filed by Augeas against Brown alleging the following 11 causes of action, including misappropriation of trade secrets, conversion, intentional interference with prospective economic advantage, defamation, fraud, and unfair competition.
In March 2006, Brown filed a motion for summary judgment as to all 11 causes of action, or in the alternative, for summary adjudication of issues. Brown based his motion on the fact that Augeas could not produce evidence to support its claims against him.
In Augeas’s opposition to Brown’s motion, it relied exclusively on declarations submitted by its owner, Rosanna Garrison, and its lawyer, Gregg Garrison. Both declarations were not sworn under penalty of perjury.
Brown filed a reply in which he objected to the admission of the declarations filed by Augeas on the ground that they were not sworn under penalty of perjury, and therefore, were inadmissible under California law.
On June 7, 2006, the court granted Brown’s motion for summary judgment, and filed a written order in which it stated: “[b]ased on the uncontroverted facts established by the Brown declaration, there is not an issue of fact as to any of the eleven causes of action. Augeas’s opposition to the motion is essentially nothing but conclusions with every [sic] little evidence, none of it is material to the elements of the causes of action in the complaint. In fact, nothing in the complaint even appears to pertain to Brown.”
Augeas promptly filed a motion for reconsideration, which the trial court denied, and on October 16, 2006, the court entered judgment in Brown’s favor. Augeas filed a notice of appeal as to that judgment on March 2, 2007.
On March 2, 2007, Brown filed a motion for attorney fees. Augeas did not oppose this motion, and the court awarded Brown fees in the amount of $194,990.25. Augeas filed a notice of appeal of the trial court’s award of attorney fees on September 18, 2007.
Discussion
The two consolidated appeals in this case relate to the trial court’s grant of Brown’s motion for summary judgment and motion for attorney fees.
While Augeas asserts 11 causes of action against Brown in its complaint in the trial court, the only claims it asserts in its appeal are the allegation of misappropriation of trade secrets, tortious interference with contract and prospective economic advantage, and unfair competition. Augeas raises no arguments on appeal regarding the remaining cause of action, and therefore, we will not consider them.
Motion for Summary Judgment
Brown moved for summary judgment, or in the alternative, summary adjudication of the 11 causes of action alleged against him in Augeas’s complaint. The court granted summary judgment, finding Augeas had not established any issues of material fact with regard to any of the causes of action alleged against Brown. In fact, the court concluded “nothing in the complaint even appears to pertain to Brown.”
“The purpose of the law of summary judgment is to provide courts with a mechanism to cut through the parties’ pleadings in order to determine whether, despite their allegations, trial is in fact necessary to resolve their dispute.” (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843 (Aguilar).) As such, the summary judgment statute (Code Civ. Proc., § 437c), “provides a particularly suitable means to test the sufficiency of the plaintiff’s prima facie case and/or of the defendant’s [defense].” (Caldwell v. Paramount Unified School Dist. (1995) 41 Cal.App.4th 189, 203, fn. omitted.)
The moving party “bears the burden of persuasion that there is no triable issue of material fact and that he is entitled to judgment as a matter of law.” (Aguilar, supra, 25 Cal.4th atp. 850, fn. omitted.) “In moving for summary judgment, a ‘plaintiff... has met’ his ‘burden of showing that there is no defense to a cause of action if’ he ‘has proved each element of the cause of action entitling’ him ‘to judgment on that cause of action. Once the plaintiff... has met that burden, the burden shifts to the defendant... to show that a triable issue of one or more material facts exists as to that cause of action or a defense thereto. The defendant... may not rely upon the mere allegations or denials’ of his ‘pleadings to show that a triable issue of material fact exists but, instead,’ must ‘set forth the specific facts showing that a triable issue of material fact exists as to that cause of action or a defense thereto.’ [Citation.]” (Id. at p. 849, quoting Code Civ. Proc., § 437c, subd. (o)(1); see also Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2004) ¶ 10:224.1, p. 10-81.)
Our review of the grant or denial of summary judgment is de novo. (Buss v. Superior Court (1997) 16 Cal.4th 35, 60; Orrick Herrington & Sutcliffe v. Superior Court (2003) 107 Cal.App.4th 1052, 1056.) In conducting such de novo review, we “consider[] all the evidence set forth in the moving and opposition papers except that to which objections have been made and sustained. [Citation.]” (Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 334.) This review consists of “an independent assessment of the correctness of the trial court’s ruling, [in which we] apply[] the same legal standard as the trial court in determining whether there are any genuine issues of material fact or whether the moving party is entitled to judgment as a matter of law.” (Iverson v. Muroc Unified School Dist. (1995) 32 Cal.App.4th 218, 222.) We need not defer to the trial court and are not bound by the reasons in its summary judgment ruling; we review the ruling of the trial court, not its rationale. (Kids’ Universe v. In2Labs (2002) 95 Cal.App.4th 870, 878.)
“Summary judgment is granted when a moving party establishes the right to the entry of judgment as a matter of law. (Code of Civ. Proc., § 437c, subd. (c).) In reviewing an order granting summary judgment, we must assume the role of the trial court and redetermine the merits of the motion. In doing so, we must strictly scrutinize the moving party’s papers. [Citation.] The declarations of the party opposing summary judgment, however, are liberally construed to determine the existence of triable issues of fact. [Citation.] All doubts as to whether any material, triable issues of fact exist are to be resolved in favor of the party opposing summary judgment. [Citation.] [¶] While the appellate court must review a summary judgment motion by the same standards as the trial court, it must independently determine as a matter of law the construction and effect of the facts presented. [Citation.]” (Barber v. Marina Sailing, Inc. (1995) 36 Cal.App.4th 558, 562.)
As in the present case, a defendant moving for summary judgment has the burden of persuasion to show that there is no merit to a cause of action. A defendant can do so by showing that one or more of the elements of the cause of action cannot be established or that there is a complete defense to that cause of action. (Code of Civ. Proc., § 437c, subd. (o)(2).) Once the defendant does so, the burden shifts back to the plaintiff to show that a triable issue of one or more material facts exists as to that cause of action or to a defense to the cause of action. In doing so, the plaintiff cannot rely on the mere allegations or denial of his pleadings, “but, instead, shall set forth the specific facts showing that a triable issue of material fact exists....” (Code of Civ. Proc., § 437c, subd. (p)(1).)
Misappropriation of Trade Secrets
A trade secret is defined by Civil Code section 3426.1, subdivision (d) as information 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.”
Thus, matters of public knowledge or of general knowledge in an industry cannot constitute a trade secret. (Aetna Bldg. Maintenance Co. v. West (1952) 39 Cal.2d 198, 206.) For this reason, a list of customers or, by a parity of reasoning, a list of suppliers, cannot constitute a trade secret or confidential information where the products in question are sold in an open, competitive market. (Continental Car-Na-Var Corp. v. Moseley (1944) 24 Cal.2d 104.)
The undisputed facts here unquestionably show that Brown never possessed, or used any secret information belonging to Augeas. Not only is the evidence upon which Augeas attempts to rely to show Brown’s knowledge of secret information inadmissible, the evidence presented cannot even establish that any of the alleged information was even secret for purposes of trade secret law. The primary material that Augeas claims is secret is client information. However, by the nature of the work Augeas’s work, and the requirement that it file reports with public agencies that contain client information and a description of Augeas’s services, all client information was available to the public. Indeed, there is no evidence that Augeas attempted to maintain any secrecy of the client information, because it could not—all information was required to be filed, and available online, by anyone, at anytime, without password protection. Simply put, there is nothing secret about who Augeas’s clients were, or what work Augeas did for them. Because its clients were a matter of public knowledge, Augeas cannot claim that the client list is a trade secret. In addition, because there was nothing secret about the client information, that information was not subject to any misappropriation on Brown’s part.
The only evidence submitted with Augeas’s opposition to Brown’s motion for summary judgment were the unsworn declarations of Augeas’s owner, Rosanna Garrison, and its attorney, Gregg Garrison. Brown objected to the admission of the declarations on the ground that they were not “certified or declared by [the declarant] to be true under penalty of perjury,” as required by Code of Civil Procedure, section 2015.5. In its order granting Brown’s motion for summary judgment, the trial court sustained Brown’s evidentiary objections, and found the declarations to be inadmissible.
The record shows no evidence produced by Augeas that creates a triable issue of material fact as to a trade secret allegation against Brown.
Unfair Competition
Augeas asserts a claim against Brown for unfair competition pursuant to Business & Professions Code, section 17200. The unfair competition claim includes allegations that defendant Jonathon Lear engaged in unfair competition by performing work as a geologist with an incorrect registration number. In addition, the complaint alleges that all defendants solicited business from Augeas clients.
The uncontroverted evidence shows that Brown has never engaged in the business of environmental consulting, never has performed work as a geologist and never has, nor would have an opportunity to solicit business from Augeas clients. In addition, there is no evidence in the record produced by Augeas to create a triable issue of material fact as to the unfair competition allegation against Brown.
Intentional Interference with Contract and Prospective Economic Advantage
Augeas’s allegations of interference with contract and prospective economic advantage relate to its relationship with WSO, and the fact that WSO decided to replace Augeas with Allterra, a company formed by former Augeas employees.
“The elements which a plaintiff must plead and [prove in order to prevail on a] cause of action for intentional interference with contractual relations are (1) a valid contract between plaintiff and a third party; (2) defendant’s knowledge of this contract; (3) defendant’s intentional acts designed to induce a breach or disruption of the contractual relationship; (4) actual breach or disruption of the contractual relationship; and (5) resulting damage.’ [Citation.]” (Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 55.)
“To prevail on a cause of action for intentional interference with prospective economic advantage in California, a plaintiff must plead and prove (1) an economic relationship between the plaintiff and some third party, with the probability of future economic benefit to the plaintiff; (2) the defendant's knowledge of the relationship; (3) the defendant's intentional acts designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm to the plaintiff proximately caused by the defendant's acts.” (Reeves v. Hanlon (2004) 33 Cal.4th 1140, 1152, fn. 6.) “The elements of the tort of interference with prospective economic advantage do not require a plaintiff to allege that the defendant acted with the specific intent, or purpose, of disrupting the plaintiff's prospective economic advantage.” (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1155.)
“[A] plaintiff seeking to recover for interference with prospective economic advantage must also plead and prove that the defendant engaged in an independently wrongful act in disrupting the relationship.” (Reeves v. Hanlon, supra, 33 Cal.4th at p. 1152 ; see also Korea Supply Co. v. Lockheed Martin Corp., supra, 29 Cal.4th at pp. 1154-1159; Della Penna v. Toyota Motor Sales, U.S.A., Inc. (1995) 11 Cal.4th 376, 393.) An act “is independently wrongful if it is unlawful, that is, if it is proscribed by some constitutional, statutory, regulatory, common law, or other determinable legal standard.” (Korea Supply Co. v. Lockheed Martin Corp., supra, 29 Cal.4th at p. 1159, fn. omitted.)
Here, the most significant problem with Augeas’s theory of Brown’s liability for WSO terminating its work relationship with Augeas is the fact that Brown is an employee of WSO. As such, Brown is subject to protection under the agent’s immunity rule, which provides that “duly acting agents and employees cannot be held liable for conspiring with their own principals (the ‘agent’s immunity rule’).” (Applied Equipment Corp. v. Litton Saudia Arabia Ltd. (1994) 7 Cal.4th 503, 512.) Simply put, “under the agent's immunity rule, an agent is not liable for conspiring with the principal when the agent is acting in an official capacity on behalf of the principal.” (Fiol v. Doellstedt (1996) 50 Cal.App.4th 1318, 1326; see also Black v. Bank of America (1994) 30 Cal.App.4th 1.)
In addition, the uncontroverted evidence demonstrates that Brown did nothing to interfere with WSO’s contractual relationship with Augeas, and in no way interfered with Augeas’s prospective economic advantage, or attempted to “take work” from Augeas. Augeas presents no evidence that can establish an issue of material fact as to the elements of either a cause of action for interference with contract, or prospective economic advantage.
Conclusion on Brown’s Motion for Summary Judgment
Based on our review of the record, we find no genuine issue of material fact produced by Augeas as to the causes of action alleged in the complaint against Brown. We will therefore affirm the trial court’s judgment in favor of Brown.
Motion for Attorney Fees
Following the trial court’s grant of his motion for summary judgment, Brown filed a motion for attorney fees under Civil Code section 3426.4, based on his assertion that Augeas brought an action against him for misappropriation of trade secrets, and section 1717, based on Brown’s success in Augeas’s action against him for breach of contract. The trial court awarded Brown fees in full in the amount of $194,990.25 under both sections 3426.4 and 1717.
All further unspecified statutory references are to the Civil Code.
“Attorney fees are allowable as costs to a prevailing party when authorized by statute. (Code Civ. Proc., §§ 1021, 1033.5, subd. (a)(10)(B).)” (Bond v. Pulsar Video Productions (1996) 50 Cal.App.4th 918, 921.) The statutory fee award at issue here was made pursuant to section 3426.4, which is part of the California Uniform Trade Secrets Act, and section 1717.
Section 3426.4 provides in pertinent part as follows: “If a claim of misappropriation is made in bad faith, a motion to terminate an injunction is made or resisted in bad faith, or willful and malicious misappropriation exists, the court may award reasonable attorney’s fees and costs to the prevailing party.”
As noted in the leading case, Gemini, the Uniform Trade Secrets Act “does not define ‘bad faith’ as used in section 3426.4....” (Gemini Aluminum Corp. v. California Custom Shapes, Inc. (2002) 95 Cal.App.4th 1249, 1261 (Gemini).) Until Gemini was decided, there was “no reported California case interpreting the term.” (Ibid.; see also, 13 Witkin, Summary of Cal. Law (10th ed., 2005) Equity, § 91, p. 389.) In defining bad faith for purposes of section 3426.4, the Gemini court discussed and ultimately adopted the reasoning of a federal case, Stilwell. (Gemini, supra, 95 Cal.App.4th at pp. 1261-1262, discussing Stilwell Development, Inc. v. Chen (C.D.Cal. Apr. 25, 1989, No. CV86 4487 GHK) 1989 U.S. Dist. LEXIS 5971 (Stilwell).)
After thoroughly analyzing the issue, the Gemini court concluded “that ‘bad faith’ for purposes of section 3426.4 requires objective speciousness of the plaintiff’s claim, as opposed to frivolousness, and its subjective bad faith in bringing or maintaining the claim.” (Gemini, supra, 95 Cal.App.4th at p. 1262.) This court has expressed agreement with that conclusion. (Yield Dynamics, Inc. v. TEA Systems Corporation (2007) 154 Cal.App.4th 547, 578 (Yield).)
Generally speaking, an appellate court reviews a fee order deferentially, for an abuse of discretion. “A request for an award of attorney fees is entrusted to the trial court’s discretion and will not be overturned in the absence of a manifest abuse of discretion, a prejudicial error of law, or necessary findings not supported by substantial evidence.” (Yield, supra, 154 Cal.App.4th at p. 577.)
The same deferential abuse of discretion standard applies to fee awards made pursuant to section 3426.4. “An award of attorney fees for bad faith constitutes a sanction [citation], and the trial court has broad discretion in ruling on sanctions motions.” (Gemini, supra, 95 Cal.App.4th at p. 1262.) We will not disturb the trial court’s exercise of discretion, as long as “ ‘some evidence exists in support of the factual findings,’ ” and the decision does not exceed “ ‘the bounds of reason.’ ” (Ibid.)
Based on our review of this record we find sufficient evidence to support both prongs of the bad faith test. (Gemini, supra, 95 Cal.App.4th at p. 1262.)
“An objectively specious claim is defined as one without substance in reality.” That definition is derived from the Stilwell case. (Stilwell, supra, 1989 U.S. Dist. LEXIS 5971 at p. *9 [to warrant an award of fees under section 3426.4, “the claim must have been without substance in reality, if not frivolous”].)
In this case, the record supports a finding that Augeas’s claims against Brown were objectively specious. Augeas produced no evidence that it had any trade secrets, because by the nature of its business all identifying client information was open and available to the public. In addition, Augeas produced nothing to demonstrate that Brown ever possessed any secret information, or misappropriated it in any way. Augeas’s persistence in pursing claims against Brown, when there was no evidence to show Brown did anything to harm Augeas is a clear indication of objective speciousness.
In addition to the record supporting a finding of objective bad faith, it also demonstrates subjective bad faith, which “ ‘ “means simply that the action or tactic is being pursued for an improper motive.” ’ ” (Gemini, supra, 95 Cal.App.4th at p. 1263.) The plaintiff’s “subjective state of mind will rarely be susceptible of direct proof; usually the trial court will be required to infer it from circumstantial evidence.” (Knight v. City of Capitola (1992) 4 Cal.App.4th 918, 932; accord, Gemini, supra, 95 Cal.App.4th at p. 1263; Yield, supra, 154 Cal.App.4th at p. 578.) “While the deterrent purpose of § 3426.4 requires subjective misconduct, the speciousness of the claim is some evidence upon which the court could rely in its assessment of subjective misconduct.” (Stilwell, supra, 1989 U.S. Dist. LEXIS 5971 at p. *12.)
In this case, we find no basis for reversing the trial court’s implicit finding of subjective bad faith. Bad faith may be inferred from the objective speciousness of appellant’s claim. (Stilwell, supra, 1989 U.S. Dist. LEXIS 5971 at p. *12.) There is no evidence in the record to support any of Augeas’s claims against Brown, as evidenced by the trial court’s grant of summary judgment in Brown’s favor. (Cf. Rosenman v. Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro (2001) 91 Cal.App.4th 859, 872 [“the record reveals nothing to support a finding of subjective bad faith” given the “convincing evidence on both sides,” and the fact that “two jurors voted to award [plaintiff] damages”].) Moreover, Augeas did not proffer any evidence of its good faith in opposing Brown’s request for fees.
Conclusion on Brown’s Motion for Attorney Fees
The record supports the court’s factual determination that Augeas brought and maintained its trade secret claim against Brown in bad faith. Both prongs of the bad faith test are satisfied here. Objectively, the claim is specious. Subjectively, it was brought for an improper motive. Given the well-supported finding of bad faith, the trial court did not abuse its discretion in awarding attorney fees as a sanction under section 3426.4.
Disposition
The judgment is affirmed, and the order granting attorney fees to Brown in the amount of $194,990.25 is affirmed.
WE CONCUR: PREMO, J., ELIA, J.