Opinion
H031026
3-3-2009
K. C. MULTIMEDIA, INC., Plaintiff and Appellant, v. BANK OF AMERICA TECHNOLOGY & OPERATIONS, INC., et al., Defendants and Respondents.
Not to be Published in Official Reports
This is an appeal from a post-judgment award of attorney fees in this civil action for trade secret misappropriation. In the companion appeal (H030494), we affirmed the judgment for respondents. In this appeal, appellant attacks the order awarding fees, asserting various grounds. Finding no basis for reversal, we shall affirm the order.
Introduction
The parties to this appeal are appellant K.C. Multimedia, Inc. (KCM), and respondents Bank of America Technology & Operations (BATO), Bank of America National Association (BANA), and Bank of America Corporation (BA). This litigation arose out of a business relationship, in which appellant supplied technology services to respondents or related entities.
The Contracts
The parties entered two written contracts, one in 1998 and another in 2000. The 2000 contract contains an attorney fee provision.
That provision reads as follows: "If either Party commences legal or arbitral proceedings to enforce the provisions of this Agreement, the prevailing Party, as determined by the court or arbitrators, shall be entitled to recover from the other, reasonable costs incurred in connection with such enforcement, including but not limited to, attorneys fees, expenses and costs of investigation and litigation/arbitration."
Pretrial Proceedings
This action was filed in June 2001. The original complaint asserted causes of action for misappropriation of trade secrets; conversion; breach of contract; and unjust enrichment. Appellant alleged that respondents misappropriated technology used in two banking applications that it developed for them.
The litigation generated an extensive pretrial procedural history, including multiple demurrers and complaint amendments, as well as several unsuccessful motions for summary adjudication or summary judgment.
In February 2006, just prior to trial, the court heard a number of in limine motions. Among its rulings on those motions, the court excluded certain evidence that appellant intended to offer. The court also took up an issue raised in respondents trial brief, statutory preemption, ultimately dismissing three causes of action of appellants fifth amended complaint on the ground that they were preempted by Californias Uniform Trade Secrets Act. (Civ. Code, § 3426 et seq.) Appellant confirmed that it would dismiss its cause of action for breach of contract, if it had not done so already. Thus, by the time of trial, appellants sole remaining cause of action against respondents was its claim for trade secret misappropriation.
Jury Trial
The case was tried over the course of approximately eight weeks, from late February 2006 to late April 2006.
The trial was aptly described as "lengthy and complex" by respondents in papers below. Appellants many witnesses included two of its principals, Sing Koo and Connie Chun, who each testified for several days.
Among the issues that appellant pressed at trial was its claim that Chuns signature on the 2000 contract had been forged. Both sides presented handwriting experts to testify about this claim.
Verdict and Judgment
On April 27, 2006, the day after it began deliberating, the jury returned special verdicts for respondents. It found that appellant failed to prove its ownership of trade secrets contained in the two banking applications. The jury also found that appellant made its misappropriation claims in bad faith.
In May 2006, the court entered judgment for respondents. That judgment is the subject of the companion appeal (H030494).
Post-Trial Fee Motion
In August 2006, respondents moved for attorney fees. Appellant opposed the motion, and respondents replied. The motion was heard and granted on September 29, 2006.
At the hearing, the trial court noted that respondents were "requesting attorneys fees under three separate statutes" — the trade secret statute (Civil Code section 3426.4), the provision for contractual attorney fees (Civil Code section 1717), and a discovery statute (Code of Civil Procedure section 2033.420). The court declined to award fees under the discovery statute, concluding that the "controlling statute" was section 3426.4 of the Civil Code. The court also stated that "the defense is entitled to attorneys fees under Civil Code Section 1717," based on the contractual provision.
Respondents sought differing amounts under the three statutes. In their notice of motion, respondents requested fees pursuant to: "(1) Civil Code § 3426.4, on grounds that Plaintiff made a claim of trade secrets misappropriation against Defendants in bad faith, and Defendants incurred attorneys fees in the amount of $1,114,930.00 in defending the misappropriation claim; (2) Civil Code § 1717, on grounds that Defendants are the prevailing party in an action on a contract containing a provision awarding attorneys fees to the prevailing party (specifically, the Technical Contract Labor Services Agreement, at § 20.2), and Defendants incurred attorneys fees in the amount of $782,883.80 in defending the breach of contract claim; and (3) Code of Civil Procedure § 2033.420, on grounds that Plaintiff failed to admit the truth of certain matters when requested to do so by BATO, and defendant BATO incurred attorneys fees in the amount of $1,100,068.75 from December 24, 2001 (the date Plaintiff denied the request at issue) [to] the date Judgment was entered."
Further unspecified statutory references are to the Civil Code.
On October 16, 2006, the court entered its formal order awarding respondents more than $1.1 million in fees and costs.
This appeal ensued. We denied appellants motion to consolidate the two appeals, but on our own motion we decided to consider the two appeals together for purposes of briefing, oral argument, and decision. In this appeal (H031026), appellant seeks reversal of the fee order.
CONTENTIONS
Appellant first attacks the award of statutory fees under section 3426.4, which is based on a finding that appellant brought its trade secret misappropriation claim in bad faith. According to appellant, the court erred in relying on its conduct at trial in finding bad faith, given the absolute litigation privilege of section 47, subdivision (b). Without the evidence covered by the privilege, appellant asserts, there is insufficient support for the order. Appellant further asserts a violation of its constitutional due process rights, on the ground that the trial courts pretrial evidentiary rulings barred evidence showing appellants good faith.
Appellant next challenges the award of contractual fees under section 1717. According to appellant, there is no basis for contractual fees, since it dismissed its contract cause of action prior to trial. Moreover, appellant asserts, the trial court erred in failing to apportion fees between its contract and tort claims.
Respondents dispute all of appellants arguments on the merits. In addition, they contend that appellant forfeited its privilege defense, as well as other claims, by failing to assert them below.
DISCUSSION
Before addressing appellants specific claims, we first describe the general principles of law that govern our analysis, including the applicable review standard.
I. Statutory Fees
A. Legal Principles
1. Overview
"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.
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 attorneys 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, 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.)
After thoroughly analyzing the issue, the Gemini court concluded "that `bad faith for purposes of section 3426.4 requires objective speciousness of the plaintiffs 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).)
2. Appellate Review
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 courts 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 courts 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.)
On the other hand, as noted in authority cited by appellant: "An appellate court reviews a determination of the legal basis for an award of attorney fees independently as a question of law." (Leamon v. Krajkiewcz (2003) 107 Cal.App.4th 424, 431.) Put another way, "de novo review of such a trial court order is warranted where the determination of whether the criteria for an award of attorney fees and costs in this context have been satisfied amounts to statutory construction and a question of law." (Carver v. Chevron U.S.A., Inc. (2002) 97 Cal.App.4th 132, 142; accord, Kangarlou v. Progressive Title Co., Inc. (2005) 128 Cal.App.4th 1174, 1177.)
B. Analysis
With those general principles in mind, we turn to appellants challenge to the award of statutory fees here.
1. Review Standard
At the outset, the parties disagree about the appropriate review standard.
As appellant acknowledges, we ordinarily review an attorney fee award only for an abuse of discretion. Nevertheless, appellant contends, "the failure to apply a settled rule of law in granting fees in reviewed de novo." As legal support for that contention, appellant cites Leamon v. Krajkiewcz, supra, 107 Cal.App.4th at page 431. As factual support for its bid for de novo review, appellant asserts that the "the trial court relied on evidence that Civil Code section 47 made privileged."
For their part, respondents argue for deferential review. Addressing the legal aspect of appellants argument, respondents correctly observe that Leamon did not involve the application of a settled rule of law. To the contrary, a "question ... of first impression" was presented there: "whether or not contractual conditions precedent to an award of attorney fees apply to a litigant who prevails by establishing the contract is invalid." (Leamon v. Krajkiewcz, supra, 107 Cal.App.4th at p. 432.) As for the factual component of appellants argument, respondents characterize it as an evidentiary question. As they see it, "KCM contends the facts do not warrant a[] fee award here, not that the trial court failed to apply any `settled rule of law."
We agree with respondents that the issue presented here turns on the presence or absence of evidentiary support for the finding of bad faith. (Cf. Corbett v. Hayward Dodge, Inc. (2004) 119 Cal.App.4th 915, 927 [in refusing to award fees under the Consumers Legal Remedies Act, where the prevailing defendant "did not establish that `plaintiffs prosecution of the action was not in good faith[,] ... [¶] ... the trial court applied the proper test and therefore this is not a legal question before us"].) Because the crux of the issue is factual, we will uphold the trial courts 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." (Gemini, supra, 95 Cal.App.4th at p. 1262.) In examining the record under that deferential standard, we view the evidence most favorably to the order, indulging all inferences that support it. (Id. at pp. 1262-1263.) Furthermore, even if we agreed with appellant that applicability of the litigation privilege warrants a more exacting review standard, appellant forfeited its privilege claim, as we explain in the next section.
2. Evidence Considered
In its bid to reverse the statutory fee award, appellant heavily relies on asserted errors in evidentiary rulings. More specifically, appellant argues that its litigation conduct was improperly considered, whereas evidence of its good faith was wrongfully excluded. For reasons discussed below, we reject both arguments.
a. Litigation conduct
In moving for attorney fees under section 3426.4, respondents asserted that appellants litigation conduct demonstrated its bad faith. Concerning the first prong of the test for bad faith — that the misappropriation claim is objectively specious — respondents argued to the trial court: "Perhaps the most telling evidence of speciousness is the multiple occasions on which KCM fabricated evidence in an attempt to maintain a viable misappropriation claim." Concerning the second prong, respondents stated: "Subjective bad faith may be inferred from the objective speciousness of a claim, or a plaintiffs conduct during the litigation." They asserted that "KCMs conduct in the litigation is further evidence of bad faith. KCM repeatedly presented false testimony and fabricated documents in support of its claim, both to avoid summary judgment and at trial."
As noted above, appellant contends that its litigation conduct cannot be used to support a finding of bad faith, relying on the absolute litigation privilege. (§ 47, subd. (b).) Without that evidence, appellant argues, there is insufficient support for the fee order.
In respondents view, however, appellant forfeited that contention by failing to assert the litigation privilege as a defense to the fee motion. As they correctly observe, a party generally may not assert an issue on appeal unless it was raised below. Where an appellate "theory was never presented to the trial court," it is forfeited. (Childrens Hospital & Medical Center v. Bontá (2002) 97 Cal.App.4th 740, 776; see also, e.g., Saret-Cook v. Gilbert, Kelly, Crowley & Jennett (1999) 74 Cal.App.4th 1211, 1228 [argument against imposition of statutory fees "was not made to the trial court, and hence was waived"].) As more specifically relevant here, a defense based on the litigation privilege "must be specially pleaded or it cannot be availed of." (Stevens v. Snow (1923) 191 Cal. 58, 64; cf. Beroiz v. Wahl (2000) 84 Cal.App.4th 485, 493, fn. 4 [defendants could rely on the litigation privilege, despite their failure to assert it in their answers, where it was argued on summary judgment].)
In this case, appellant said nothing about the litigation privilege in its written opposition to respondents motion for fees. Nor did appellant mention the privilege at the hearing on the motion; the only topic argued there was apportionment of contractual fees.
Having failed to assert the litigation privilege below, appellant cannot rely on it here. (Childrens Hospital & Medical Center v. Bontá, supra, 97 Cal.App.4th at pp. 776-777; Saret-Cook v. Gilbert, Kelly, Crowley & Jennett, supra, 74 Cal.App.4th at pp. 1228, 1229.) For that reason, appellants litigation conduct is properly considered in assessing bad faith.
b. Evidence excluded in pretrial motions
Appellant asserts a violation of its constitutional due process rights, on the ground that the trial courts pretrial evidentiary rulings barred evidence showing appellants good faith. According to appellant: "Due process considerations, along with KCMs right to sue in court, required ... the trial court to hear all relevant evidence on KCMs state of mind in bringing this case. But, the trial court denied KCM the chance to introduce its most persuasive evidence that it believed it had a good case." Appellant then specifies four specific items of evidence, which were excluded in pretrial motions, that it claims should have been admitted to show its good faith: (1) a statement made by appellants former employee, co-defendant Allen Tam, at his exit interview, admitting trade secret misappropriation; (2) the amount of money that respondents expended to pay Tams attorneys fees; (3) federal indictments of Tam; and (4) appellants ownership of copyrights on the underlying technology.
We reject appellants argument for several reasons.
First, it seems to us that the "most persuasive evidence" of appellants good faith would have been direct evidence regarding motive, such as a declaration by its principals. As recent authority from this court indicates, appellant could have proffered direct evidence of its good faith in opposition to the fee motion. (Yield, supra, 154 Cal.App.4th at p. 579 [plaintiffs evidence in opposition to fee motion should not have been stricken: the declaration of plaintiffs principal "appears relevant as evidence of his subjective good faith" while deposition testimony from plaintiffs expert "tended logically to support an inference that [plaintiffs] principals subjectively believed the trade secret claim had merit, and were pursuing it for that reason"].)
Second, two of the four categories specified by appellant as erroneously excluded apparently did find their way into the record at the hearing on the fee motion. The last two items — the indictments and the copyrights — apparently came in as exhibits to the declaration of one of appellants trial attorneys, Robert Nakamae.
Third, as to the remaining two documents that were excluded for trial purposes, we see no reason to fault the trial court for their absence from the motion record. To the extent that those documents tended to show good faith, nothing prevented appellant from attempting to reintroduce them in its opposition to the fee motion. One category of the proffered evidence — the amount respondents paid for Tams attorney fees — was excluded on relevancy grounds. But as this court has said: "The subjective element of bad faith, at least, might be proven or refuted by evidence that would have been wholly irrelevant at trial." (Yield, supra, 154 Cal.App.4th at p. 579.) Here, the trial court was not asked to reevaluate the relevancy of the previously excluded evidence in the context of the fee motion; appellant simply did not reoffer those documents as evidence of its good faith.
Finally, we observe, the trial judge who decided the fee motion was aware of the excluded evidence, having ruled on the in limine motions himself. Under these circumstances, we are not persuaded that appellant was prejudiced by their absence from the record.
3. Bad faith
With that picture of the evidentiary record in mind, we now consider whether it supports the necessary finding of bad faith.
a. Significance of the jury verdict
The jury was asked to render a verdict on the question of whether appellant made its trade secret misappropriation claims in bad faith. It answered in the affirmative. In instructing the jury on that issue, the trial court stated: "A claim for misappropriation of trade secrets is made in bad faith when the claim is objectively specious and plaintiff acted in subjective bad faith in bringing or maintaining the claim. An objectively specious claim is defined as one without substance in reality. The conduct required to show subjective bad faith is conduct that is at least reckless or grossly negligent, if not intentionally negligent [sic] and willful." Both the verdict form and instruction were given at appellants request.
As they did below, the parties disagree about the nature of the jurys finding of bad faith. Appellant describes it as "advisory." Respondents disagree.
Addressing the parties disparate views of the verdict, we first observe that there is nothing improper about a jury determining bad faith. As this court has said: "The question of a defendants motivation and intent involves credibility determinations and other factual resolutions well within the province of the jury." (De Anza Santa Cruz Mobile Estates Homeowners Assn. v. De Anza Santa Cruz Mobile Estates (2001) 94 Cal.App.4th 890, 918.)
In this case, however, the issue is academic. Whether the jury verdict is advisory or not, the trial judge could and did find bad faith. In his words: "Whether the jurys finding has significance and Im simply reviewing the finding, or its up to me to make an independent judgment in terms of bad faith, I think that my approach should be the same, and Im addressing the same issue: Was there sufficient evidence of bad faith. And I believe that there was sufficient evidence of bad faith."
Even upon proof of bad faith, an award of fees apparently remains discretionary with the court. In the words of the statute: "If a claim of misappropriation is made in bad faith, ... the court may award reasonable attorneys fees and costs to the prevailing party." (§ 3426.4, italics added.)
Here, however, appellant asserts insufficient proof of bad faith. We therefore focus our attention on that issue.
We agree with the trial courts determination. As we now explain, this record contains sufficient evidence to support both prongs of the bad faith test. (Gemini, supra, 95 Cal.App.4th at p. 1262.)
b. Bad faith: objective prong
As stated in the jury instruction given here: "An objectively specious claim is defined as one without substance in reality." That definition is derived from the Stilwell case. (Stilwell Dev., Inc. v. Chen, 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"].)
As respondents correctly observe, objective speciousness can be demonstrated by a partys reliance on forged documents. In support of that observation, respondents cite a case from this court, Computer Prepared Accounts, Inc. v. Katz (1991) 235 Cal.App.3d 428 (Katz). There, this court affirmed a trial court order for attorney fees and sanctions, made under section 3426.4 and Code of Civil Procedure section 128.5. (Id. at pp. 430, 431.) The trial court concluded that the plaintiff had sued for trade secret misappropriation in bad faith "`in that plaintiffs claims were based upon documents that were not authentic, that plaintiff knew that the documents were not authentic, and plaintiff failed to verify the authenticity of the documents after being advised by defendants that the documents were not authentic, and for the further reason that plaintiff failed to establish that there were any trade secrets that were misappropriated by defendants." (Id. at p. 432, italics omitted.) On appeal, the plaintiff "conceded, albeit belatedly, that the trial courts judgment should be affirmed." (Id. at p. 433.) With that concession, the "sole issue" before this court was "whether the appeal [was] frivolous under Code of Civil Procedure section 907." (Ibid.) In determining that issue, this court observed, the courts apply a two-part test based on an objective and a subjective standard. (Id. at p. 434.) "With respect to the objective standard," this court concluded, the test was satisfied. (Id. at p. 438.) In response to the appellants assertion that proffering forged documents was not an adequate predicate for sanctions, this court said: "This argument is ludicrous. It offends us to reiterate it. Without a doubt submitting forged documents to a trial court is sufficient indication of `bad-faith actions or tactics that are frivolous or solely intended to cause unnecessary delay. (Code Civ. Proc., § 128.5.)" (Ibid.) Though decided under Code of Civil Procedure sanction provisions, Katz more broadly supports the unremarkable proposition that presenting forged documents in a judicial proceeding can give rise to a finding of bad faith.
Cases decided under other statutory schemes likewise reinforce the principle that the submission of false evidence may support a finding of bad faith, warranting a fee award.
Such cases have arisen under Californias Fair Employment and Housing Act (FEHA). (Gov. Code, § 12900 et seq.) FEHA includes a provision permitting a discretionary fee award to the prevailing party in an employment discrimination case. (Gov. Code, § 12965, subd. (b).) As interpreted by California courts, a prevailing "defendant should be awarded attorney fees" under that provision "only where the action brought is found to be unreasonable, frivolous, meritless or vexatious." (Bond v. Pulsar Video Productions, supra, 50 Cal.App.4th at pp. 921-922, internal quotation marks and italics omitted.) For purposes of this provision, a discrimination claim that is "without foundation and brought in bad faith" warrants the imposition of fees. (Id. at p. 925.)
As case law under FEHA makes clear, claims based on false testimony lack foundation. In the Saret-Cook case, for example, the court affirmed an award of fees to the prevailing defendant. (Saret-Cook v. Gilbert, Kelly, Crowley & Jennett, supra, 74 Cal.App.4th at p. 1230.) In doing so, it quoted this finding by the trial court: "`At no time did this action ever have a factual basis. Plaintiff simply lied about what occurred to her. She was aware of her lies during the course of this lawsuit and persisted in weaving a more and more incredible story to explain lies with more lies. She prosecuted this lawsuit to the point of harassing Defendants and third party witnesses. Her bad faith is evidenced by, among other things, her actual knowledge of the falsity of her allegations and testimony." (Id. at p. 1229; cf. Rosenman v. Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro (2001) 91 Cal.App.4th 859, 871 [in reversing the defense fee award, the court distinguished the plaintiffs case "from other cases involving perjury and fabricated evidence"].)
Similar results obtain in federal cases decided under Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq., which likewise includes a discretionary fee provision. (See, e.g., Blue v. U.S. Dept. of Army (4th Cir. 1990) 914 F.2d 525, 544 [affirming defense fee award where plaintiffs "leveled widespread charges of racial discrimination without any regard for the truth of their allegations" and "perjured themselves"]; Carrion v. Yeshiva University (2nd Cir. 1976) 535 F.2d 722, 728 [affirming defense fee award where discrimination plaintiff "`deliberately perjured herself"]; Daramola v. Westinghouse Elec. Corp. (W.D.Pa. 1995) 872 F.Supp. 1418, 1420 [affirming defense fee award where the plaintiff "fabricated evidence and lied to the court"].)
In this case, the record supports a finding that appellant fabricated evidence and presented a false forgery claim. As the trial court explained at the hearing on the fee motion: "I believe that a central issue in this case had to do with the November 2000 contract. I think the way the case was presented, it was clear someone or some party was dishonest. [¶] I reviewed in my mind the testimony of the experts. I did not find the plaintiffs expert, handwriting expert persuasive based on credentials or lack thereof, and the comment she made in support of her conclusion. [¶] By contrast, I found the testimony of the defense expert to be very persuasive. I found that witness to be extremely well qualified. And I came to the same conclusion. I believe the jury had become [sic] that the allegation of forgery was just not true. It was something that was made up." The court cited appellants bogus forgery claim as "the primary reason, among others," for determining that respondents were entitled to statutory fees under section 3426.4.
Appellant resists the finding of objective speciousness based on the procedural history of this litigation. Citing the fact that it survived two motions for summary judgment as well as motions "for nonsuit at several points during the trial," appellant reasons that "the trial judge necessarily found that KCMs position had enough merit to go to the jury. KCMs case could hardly be specious."
We disagree. There is no "bright-line rule whereby a plaintiff who survives a motion for summary judgment or nonsuit can never be liable for attorney fees." (Rosenman v. Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, supra, 91 Cal.App.4th at p. 866 [FEHA award].) "Such a rule would unjustifiably shield those plaintiffs who are able to raise a triable issue of fact, even though it be by means of fabricated evidence and false testimony." (Ibid.) "Declarations sufficient to create a triable issue in a summary judgment proceeding may, in the crucible of a trial, be revealed to be spurious and the litigants claim frivolous, unreasonable and without foundation." (Bond v. Pulsar Video Productions, supra, 50 Cal.App.4th at p. 923 [same].) "If the false and unfounded nature of such a plaintiffs claims is revealed at trial, the prevailing defendant should be able to recoup its attorney fees...." (Rosenman, at p. 866.)
By definition, forgeries and other false evidence are a fiction. (See Katz, supra, 235 Cal.App.3d at p. 438.) Claims based on such evidence are "without substance in reality" and thus objectively specious. (Stilwell Dev., Inc. v. Chen, supra, 1989 U.S. Dist. LEXIS 5971 at p. *9.) The presentation of false evidence in this case thus supports a determination of objective speciousness, thereby satisfying the first prong of the bad faith test.
c. Bad faith: subjective prong
Subjective bad faith "`means simply that the action or tactic is being pursued for an improper motive." (Gemini, supra, 95 Cal.App.4th at p. 1263.) The plaintiffs "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 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 Dev., Inc. v. Chen, supra, 1989 U.S. Dist. LEXIS 5971 at p. *12.)
In this case, we find no basis for reversing the trial courts implicit finding of subjective bad faith. As just noted, bad faith may be inferred from the objective speciousness of appellants claim. (Stilwell Dev., Inc. v. Chen, supra, 1989 U.S. Dist. LEXIS 5971 at p. *12.) The evidence in support of appellants claim can be fairly characterized as either fabricated or flimsy, as reflected in the jurys quick and unanimous verdict after a long trial. (Cf. Rosenman v. Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, supra, 91 Cal.App.4th at p. 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, as noted above, appellant did not proffer any direct evidence of its good faith in opposing respondents request for fees.
We are not persuaded to a contrary conclusion by appellants contention that the trial courts implicit finding of bad faith cannot be reconciled with its decision not to award fees under Code of Civil Procedure section 2033.420. According to appellant, an award of fees under that provision "is mandatory unless `the party failing to make the admission had reasonable ground to believe that the party would prevail on the matter. Section 2033.420 (b)(3)." From the refusal of a fee award under the discovery statute, appellant posits the presence of reasonable grounds for its belief in prevailing. That reasoning is not persuasive, however, given the trial judges remarks at the hearing on the fee motion. The judge expressed his view that (1) it was not "appropriate" to award attorneys fees under the discovery provision in this case, and (2) section 3426.4 was the "controlling" provision. Viewing those statements most favorably to the order, we infer that the court elected to apply the more specific provision; we reject appellants competing inference that the court necessarily found good faith. (See Gemini, supra, 95 Cal.App.4th at pp. 1262-1263.)
d. Conclusion
The record supports the courts factual determination that appellant brought and maintained its trade secret claim 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.
II. Contractual Fees
Appellant also challenges the order to the extent that it awards contractual fees under section 1717. Appellant argues that there is no basis for the award since it dismissed its contract cause of action prior to trial. Appellant also asserts that the trial court erred in failing to apportion fees between its contract and tort claims.
As we read the record, we discern no separate award based on section 1717. True, the trial court indicated that respondents were entitled to attorney fees both for defending the bad faith trade secret claim (§ 3426.4), and as the prevailing party on the contract claim dismissed prior to trial (§ 1717). Nevertheless, it appears that the award is actually based on section 3426.4 alone. The court awarded respondents the sum of $1,114,930. That sum is the exact amount that respondents sought in statutory fees under section 3426.4. It exceeds the amount that respondents sought in contractual fees under section 1717. And at the hearing on the fee motion, the court indicated that it was awarding that sum "pursuant to" section 3426.4.
Under these circumstances, having affirmed the statutory fee award, we need not and do not address the parties contentions concerning contractual fees.
DISPOSITION
We affirm the order entered October 19, 2006, which awards respondents attorney fees in the amount of $1,114,930.
WE CONCUR:
Mihara, Acting P.J.
Duffy, J.