Opinion
B226687
09-02-2011
CRAFTY KIDS CLUB, Plaintiff and Respondent, v. JOSEPH GRESSIS et al., Defendants and Appellants.
Ropers, Majeski, Kohn & Bentley, Thomas M. O'Leary, James C. Hilderbrand for Defendants and Appellants. Steckbauer Weinhart Jaffe, William W. Steckbauer, James M. Gilbert, Sean A. Topp for Plaintiff and Respondent.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Los Angeles County Super. Ct. No. BC408233)
APPEAL from a judgment of the Superior Court of Los Angeles County. Mark V. Mooney, Judge. Affirmed.
Ropers, Majeski, Kohn & Bentley, Thomas M. O'Leary, James C. Hilderbrand for Defendants and Appellants.
Steckbauer Weinhart Jaffe, William W. Steckbauer, James M. Gilbert, Sean A. Topp for Plaintiff and Respondent.
Joseph Gressis, Wayne Rawley, and Secret Handshake Entertainment appeal from the judgment entered against them and in favor of respondent Crafty Kids Club, Inc., dba Planet Video (hereinafter "Planet Video"), on Planet Video's complaint. We affirm the judgment.
Introduction
The challenged judgment is based on a jury finding that appellants, former Planet Video employees, misappropriated Planet Video's trade secret, to wit, a customer list. The jury assessed damages in the amount of $250,000, apportioning 65 percent of the responsibility for harm to Gressis, 10 percent to Rawley, and 25 percent to Secret Handshake. The jury also found that Gressis had acted willfully and maliciously, and the trial court assessed $1,000 in exemplary damages against him. (Civ. Code, § 3426.3.)
A cause of action for misappropriation of trade secrets under the Uniform Trade Secrets Act, Civil Code sections 3426 et seq., "requires the plaintiff to 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. [Citations.]" (Sargent Fletcher, Inc. v. Able Corp. (2003) 110 Cal.App.4th 1658, 1665.)
"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, subd. (d)(1)(2).) It is well established that a customer list may be a trade secret, if it has economic value. (ABBA Rubber Co. v. Seaquist (1991) 235 Cal.App.3d 1, 18.)
Appellants contend that there was insufficient evidence that the list was a trade secret, both because it had no independent economic value and because it was not the subject of reasonable efforts to maintain its secrecy. They also contend that there is insufficient evidence that one of them, Rawley, misappropriated the customer list. We review the facts with those contentions in mind.
Facts
Planet Video is in the business of making demo reels for actors. An actor's demo reel is a two to three minute compilation of television or movie scenes in which the actor has appeared. It is an actor's resume, and is designed to be viewed by agents, producers, casting directors, and directors.
From its inception in 1995, Planet Video kept a database of its customers. This database was kept on commercial FileMaker Pro software, which Planet Video customized to its needs. The database had an entry for each of Planet Video's thousands of customers, and included the customer's name, address (which might include a home address), phone numbers (which might include a home phone number), email addresses, and information about each job Planet Video did for that customer, including billing information, number of hours spent on each project, and so on. This database helped Planet Video run its business efficiently and helped it in advertising and marketing. It was used for creating invoices, for customer contact, and to create reports for the accountant. It enabled Planet Video to identify its most profitable customers. The list contained "private information" which was not shared with anyone outside Planet Video.
Planet Video's operations manager testified that Planet Video does not disclose its client list and or billing information and that all that information is of great economic value to Planet Video. He testified that "if our competitors knew who our best clients were, they would raid them."
The events at issue here took place in 2007 and 2008. In 2007, appellants Gressis and Rawley were editors at Planet Video. (Demo reels are created by editors.) Amy Conner (who is not a party to this action) was Planet Video's office manager. Gressis, Rawley, and Conner were Planet Video's only staff. Gressis worked full time, as did Conner. Rawley worked 15 or 20 hours a week, typically at night and on weekends. All three used the FileMaker Pro database as part of their work.
Planet Video's physical premises consisted of two rooms in an office building. One room was the office and the other housed the editing equipment. The office building door was kept locked, so that Planet Video employees had to personally admit customers. Customers were never left alone in the Planet Video offices and were never given access to Planet Video computers.
At some point in 2007, Gressis decided to set up his own production company, Secret Handshake, to, among other things, make demo reels for actors. In September or October of that year, he spoke to Rawley and Conner about his proposed venture, asking them to join him. They agreed, though only Gressis and his partner (not a party here) had an ownership interest in Secret Handshake. Rawley and Gressis began working at Secret Handshake in late 2007, while they were working at Planet Video.
Before they left Planet Video, Gressis and Conner attempted to shift Planet Video clients to Secret Handshake. Gressis told Conner that he wanted to take all of Planet Video's customers, and that he wanted to "kill" Planet Video, so that Planet Video customers would go to Secret Handshake. Further, Gressis downloaded Planet Video computer files which the parties refer to as Achieved Media, that is, the source material for the demo reels. These files were useful if customers returned to update their reels, which they frequently did. Gressis did this in secret, so that Planet Video would not find out.
And, at Gressis's direction, Conner transferred copies of Planet Video's FileMaker Pro database to Secret Handshake, without Planet Video's knowledge or permission. Gressis wanted the copies so that he could send post cards and emails, and market Secret Handshake. He knew that the database belonged to Planet Video, and he wanted it to be taken in secret, so that Planet Video would not know.
Gressis used information in the database to send an email to all Planet Video customers, soliciting their business. He also called Planet Video customers and solicited their business. In addition, on two occasions, Secret Handshake sent promotional emails to Planet Video customers, using the information in the Planet Video database.
Secret Handshake bought its own copy of FileMaker Pro, so that it could use the Planet Video's customer list, which it "referenced," for customer contact and other purposes.
Discussion
"Economic value"
"The requirement that a customer list must have economic value to qualify as a trade secret has been interpreted to mean that the secrecy of this information provides a business with a 'substantial business advantage.' [Citation.] In this respect, a customer list can be found to have economic value because its disclosure would allow a competitor to direct its sales efforts to those customers who have already shown a willingness to use a unique type of service or product as opposed to a list of people who only might be interested. [Citation.] Its use enables the former employee 'to solicit both more selectively and more effectively.' [Citation.]" (Morlife, Inc. v. Perry (1997) 56 Cal.App.4th 1514, 1522.)
The evidence here was that Planet Video's customer list allowed Gressis and Secret Handshake to direct their sales efforts to actors who had already had demo reels made, and thus shown a willingness to use that type of service. Further, as respondents argue, there was evidence that Secret Handshake's business plan was, at least in part, to establish itself by taking Planet Video's clients, making Planet Video's customer list doubly important to Secret Handshake. "A violation of the [Uniform Trade Secrets Act] occurs when an individual misappropriates a former employer's protected trade secret client list, for example, by using the list to solicit clients [citation] or to otherwise attain an unfair competitive advantage [citation]." (Reeves v. Hanlon (2004) 33 Cal.4th 1140, 1155.)
There was, as appellants argue, evidence that other publically available databases list the names and addresses of actors, but that changes nothing. Not all actors are interested in demo reels, and a database of actors who are interested clearly has more value to a maker of demo reels, than does a list of all actors.
Appellants also point to the evidence that, at least at a certain point, Planet Video did not fully exploit the value of its customer list by marketing to its most profitable customers, who could be identified from the list. That evidence does not establish that the list lacked economic value.
As appellants argue, the evidence here is different than the evidence in Morlife, supra, 56 Cal.App.4th 1514, and the cases cited herein. It is even, perhaps, not as strong or compelling. That is of no moment. It is sufficient to note that there was substantial evidence for the jury's finding. (Vacco Industries, Inc. v. Van Den Berg (1992) 5 Cal.App.4th 34, 50.)
" Reasonable efforts to maintain secrecy"
Here, appellants point to the precautions which could have been taken to protect the customer list, but were not: the database was not password protected, there was no employee handbook identifying the database as confidential, employees were not required to sign a confidentiality agreement, the data was not marked as confidential, and so on. Appellants cite cases such as Courtesy Temporary Service, Inc. v. Camacho (1990) 222 Cal.App.3d 1278, In re Providian Credit Card Cases (2002) 96 Cal.App.4th 292, and Whyte v. Schlage Lock Co. (2002) 101 Cal.App.4th 1443, which discuss the value of such evidence. None of those cases hold that such evidence is an absolute requirement, and indeed the statute only refers to evidence of steps that are reasonable under the circumstances.
Here, the circumstances were that there were only three employees, each of whom needed access to the database. If there had been password protection, each would have had a password. Given that each went to Secret Handshake, password protection would have accomplished nothing. And, as respondents argue, the jury could properly have found that no employee handbook or other device would have protected the list from Gressis, who knew that the list was the private property of Planet Video, and took it anyway.
Under these circumstances, the evidence that Planet Video safeguarded the database by locking its doors and by giving access to the database only to employees is sufficient for the jury verdict.
Appellants cite Bacon v. Volvo Svc. Center (2004) 266 Ga.App. 543, 545-546, 597 S.E.2d 440, which considered Georgia's version of the Uniform Trade Secrets Act. In that case, a Georgia appellate court found that an employer had not met its burden, and that the trial court should have granted a judgment notwithstanding the verdict in favor of the defendants, former employees who took a customer service list. As appellants argue, the Georgia court noted that the employer had not password protected the customer service list and that there was no confidentiality agreement. Those facts are similar to the facts before us, but this case presents other facts, too, concerning the locked doors, the size of the workforce, and so on. Trade secret cases are decided on their facts, and the Georgia case is not compelling authority.
The judgment against Rawley
Respondent's theory against Rawley was misappropriation through use. Use of a trade secret without consent is misappropriation if the person who used that secret "knew or had reason to know that his or her knowledge of the trade secret was . . . [d]erived from or through a person who had utilized improper means to acquire it." (Civ. Code, § 3426.1, subd. (b)(2)(B)(i).)
Appellants' contention is that there is insufficient evidence that Rawley used the customer list. We see sufficient evidence for the jury verdict in the evidence concerning the email announcement which Rawley sent out concerning his affiliation with Secret Handshake.
Rawley testified that he sent the announcement to contacts in his personal email program and that he did not use the FileMaker Pro database, but the text of the announcement is to the contrary. It reads "Hello! Wayne Rawley here, the friendly neighborhood editor that has, in the past worked with you on your demo reel. Please forgive the spam, but I wanted to let all of my former clients know that I have moved! . . ." As respondents argue, from the reference to "all of my former clients," the jury could properly have concluded that Rawley contacted all 200 of his former clients and that he used the database to do so. The evidence is thus sufficient for the judgment.
Disposition
The judgment is affirmed. Respondents to recover costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
ARMSTRONG, J. We concur:
TURNER, P. J.
MOSK, J.