Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County No. BC353644, Ruth Ann Kwan, Judge.
Saied Kashani for Plaintiffs and Appellants.
Alston & Bird, Ward L. Benshoff and Stephanie A. Jones for Defendants and Respondents.
ASHMANN-GERST, J.
Ultimax Cement Manufacturing Corporation (Ultimax) and Hassan Kunbargi (Kunbargi) appeal the summary judgment entered in favor Quikrete Companies, Inc. and Quikrete International, Inc. (collectively Quikrete) on the grounds that Ultimax and Kunbargi’s action is barred by the statute of limitations.
We find no error and affirm.
FACTS
The pleading
As alleged: During the 1990’s, Quikrete purchased Ultimax’s rapid-hardening cement to resell to its licensees and franchisees for use in Quikrete products. Eventually Ultimax lost Quikrete’s business to CTS Cement Manufacturing Corporation (CTS) because, in 1997, CTS began paying secret $25 kickbacks to Quikrete for every ton of rapid-hardening cement purchased.
Kunbargi licensed cement formulas and patents to Ultimax. CTS misappropriated Kunbargi’s formulas and used them to take away Ultimax’s business. On June 13, 2002, Ultimax and Kunbargi sued CTS in federal court (federal action) for, inter alia, patent infringement. In May 2004, Ultimax deposed the president of CTS, William McCormick (McCormick), and was informed that CTS agreed to pay kickbacks to Quikrete.
Ultimax assigned its causes of action against CTS and Quikrete to Kunbargi. On October 13, 2006, Ultimax (as a nominal party) and Kunbargi filed a complaint against CTS and Quikrete. The first cause of action alleged that CTS violated Business and Professions Code section 17200 et seq. by misappropriating trade secrets. The second cause of action alleged that CTS and Quikrete committed unfair practices in violation of section 17045 when CTS made and Quikrete received secret $25 payments. In addition, Ultimax and Kunbargi alled: “Because the kickback scheme was known only to CTS and Quikrete, Ultimax did not discover and in the exercise of reasonable diligence could not have discovered the kickback scheme until McCormick admitted the arrangement in May 2004.”
All further statutory references are to the Business and Professions Code unless otherwise indicated.
Section 17045 of the Unfair Practices Act provides: “The secret payment or allowance of rebates, refunds, commissions, or unearned discounts, whether in the form of money or otherwise, or secretly extending to certain purchasers special services or privileges not extended to all purchasers purchasing upon like terms and conditions, to the injury of a competitor and where such payment or allowance tends to destroy competition, is unlawful.”
Summary judgment
Quikrete and CTS filed a joint motion for summary judgment or summary adjudication. Regarding the first cause of action, CTS argued that it was time-barred by the three-year statute of limitations in Civil Code section 3426.6. Quikrete and CTS argued that the unfair practices claim was untimely under the three-year statute of limitations enunciated in Code of Civil Procedure section 338, subdivision (a). Specifically, according to CTS and Quikrete, Ultimax and Kunbargi were on inquiry notice of wrongful conduct when they filed the federal action on June 13, 2002, and alleged improper pricing.
The original complaint and second amended complaint in the federal action were attached to the summary judgment papers. In the original complaint, which was against CTS but not Quikrete for patent infringement, unfair competition in violation of section 17200 et seq. and misappropriation of trade secrets, it was alleged that CTS infringed on Ultimax and Kunbargi’s patents and tried to drive them out of business by underbidding and lowering prices to specific customers. The allegations further averred that CTS could “afford to do this because [it] simply copied Kunbargi’s patented formulas and methods and did not expend any time, effort and expense to develop [its] technology.” Quikrete was added as a defendant to the patent infringement cause of action in the second amended complaint.
In further support of its position, Quikrete relied on the fact that in an August 8, 2003, response to an interrogatory served on him in the federal action, Kunbargi stated that CTS “engaged in unfair competition in 1997, when CTS offered Quikrete cement at $185 per ton and Quikrete agreed to purchase the cement at this ‘greatly reduced price,’ leading Ultimax, which had been selling cement to Quikrete at $210 pe[r] ton, to lose the Quikrete account.”
Ultimax and Kunbargi filed an opposition to the joint motion. They argued, among other things, that the first cause of action against CTS was subject to a four-year statute of limitations. No argument was offered in their brief as to the second cause of action or as to Quikrete. However, in their response to separate statement fact No. 40, they stated: “[Ultimax and Kunbargi] knew about the underbidding at the time of the [federal action]. But [they] did not discover the kickbacks until CTS president [McCormick] testified to the kickbacks... at a deposition in May 2004.” In addition, Kunbargi submitted a declaration. He averred that when they filed the federal action, he and Ultimax believed that CTS was using an unlawful pricing scheme.
At the September 12, 2007, hearing, the parties discussed the first cause of action against CTS. They did not discuss the second cause of action or Quikrete. The hearing was continued. After the continued hearing, the trial court took the motion under submission.
At the September 12, 2007 hearing, the trial court stated that the hearing was continued to February 21, 2008. Supplemental papers filed by the parties related to the first cause of action indicate that the continued hearing was held on September 21, 2007. We have no transcript of that hearing, so we do not know if the second cause of action was argued.
The trial court denied summary judgment for CTS because the first cause of action was timely under a four-year limitation. But as to Quikrete, the trial court found that Ultimax and Kunbargi “had knowledge as early as June 13, 2002, that [CTS was] engaging in wrongful pricing schemes” and the unfair practices claim should have been filed by June 13, 2005.
Judgment was entered in favor of Quikrete.
This timely appeal by Ultimax and Kunbargi followed.
STANDARD OF REVIEW
When a party challenges the entry of summary judgment, we review the papers submitted below on an independent basis. (Galanty v. Paul Revere Life Ins. Co. (2000) 23 Cal.4th 368, 374.) Like the trial court, “[w]e first identify the issues framed by the pleadings, since it is these allegations to which the motion must respond. Secondly, we determine whether the moving party has established facts which negate the opponents’ claim and justify a judgment in the movant’s favor. Finally, if the summary judgment motion prima facie justifies a judgment, we determine whether the opposition demonstrates the existence of a triable, material factual issue. [Citation.]” (Torres v. Reardon (1992) 3 Cal.App.4th 831, 836.)
DISCUSSION
Ultimax and Kunbargi contend that their unfair practices claim against Quikrete is saved from the statute of limitations by the discovery and fraudulent concealment rules, and also by the equitable tolling doctrine. Lying below is our analysis and conclusion that their arguments lack merit.
1. The discovery rule.
The parties agree that because the Unfair Practices Act (§ 17000 et seq.) does not contain a statute of limitations, Code of Civil Procedure section 338, subdivision (a) fills the gap with a three-year limitation on “[a]n action upon a liability created by statute.” The statute of limitations in a tort action normally begins to run after the occurrence of all elements of a cause of action. (April Enterprises, Inc. v. KTTV (1983) 147 Cal.App.3d 805, 826.) But this axiom has been softened by the discovery rule in cases where it would be manifestly unjust to deprive a plaintiff of a cause of action before it is aware of its injury. (Craig v. City of Poway (1994) 28 Cal.App.4th 319, 342 (Craig).) A cause of action subject to the discovery rule accrues when “the plaintiff has reason to suspect an injury and some wrongful cause, unless the plaintiff pleads and proves that a reasonable investigation at that time would not have revealed a factual basis for that particular cause of action. In that case, the statute of limitations for that cause of action will be tolled until such time as a reasonable investigation would have revealed its factual basis.” (Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 803 (Fox).) Whether the discovery rule applies to a cause of action arising under the Unfair Practices Act (§ 17000 et seq.) is an open question.
In our view, the law would be manifestly unjust if the statute of limitations began running before a plaintiff was aware or should have been aware that it was injured by secret payments made by a competitor. Otherwise, violators would be rewarded for their secrecy within the limitations period. We therefore hold that the discovery rule is applicable to a claim arising under section 17045. This is consistent with Craig. It applied the discovery rule to a cause of action which arose under a statute and was therefore subject to the limitation in Code of Civil Procedure section 338, subdivision (a). (Craig, supra, 28 Cal.App.4th at p. 342.)
Ultimax and Kunbargi argue that their claim was not time-barred because they did not know or reasonably know of their claim until May 2004.
In opposition to the summary judgment motion, Kunbargi declared: “We at Ultimax perceived a general pattern of below-cost pricing and other improper price-cutting by CTS designed to drive Ultimax out of business, not just with respect to Quikrete but other customers as well. This is unfair business practices as we understood at the time we filed the federal complaint.” The federal action alleged that CTS “conducted a systematic campaign to drive [Ultimax and Kunbargi] out of the cement business” by underbidding and lowering its prices to specific customers. It further alleged that CTS urged Quikrete and other customers to ignore the patent infringement claims of Ultimax and Kunbargi. In an August 8, 2003, response to an interrogatory served on him in the federal action, Kunbargi stated that CTS “engaged in unfair competition in 1997, when CTS offered Quikrete cement at $185 per ton and Quikrete agreed to purchase the cement at this ‘greatly reduced price,’ leading Ultimax, which had been selling cement to Quikrete at $210 per ton, to lose the Quikrete account.”
Delayed accrual of a cause of action “is normally a question of fact.” (Jolly v. Eli Lilly & Co. (1988) 44 Cal.3d 1103, 1112.) But “where the uncontradicted facts established through discovery are susceptible of only one legitimate inference, summary judgment is proper.” (Ibid.) In our view, the facts developed below support the inference that Ultimax and Kunbargi were on inquiry notice when they filed the federal action. By June 13, 2002, they had reason to suspect, and did suspect, that they lost business due to illegal pricing. (Jolly, supra, 44 Cal.3d at pp. 1110–1111 [“A plaintiff need not be aware of the specific ‘facts’ necessary to establish the claim; that is a process contemplated by pretrial discovery. Once the plaintiff has a suspicion of wrongdoing, and therefore an incentive to sue, [they] must decide whether to file suit or sit on [their] rights. So long as a suspicion exists, it is clear that the plaintiff must go find the facts; [they] cannot wait for the facts to find [them]”]; Grisham v. Phillip Morris U.S.A., Inc. (2007) 40 Cal.4th 623, 634 [a plaintiff has reason to discover a cause of action when they have reason to suspect a factual basis for its elements].) The question remains, however, whether there are other legitimate inferences.
Not only is it unlawful for a seller to secretly pay rebates or unearned discounts, it is unlawful for a buyer to receive them. (Diesel Electric Sales & Service, Inc. v. Marco Marine San Diego, Inc. (1993) 16 Cal.App.4th 202, 214–215.) Consequently, if Ultimax and Kunbargi had a reason to suspect that CTS was paying unearned rebates or discounts to its buyers, then they had reason to suspect that the buyers were committing unfair practices, too. Bringing it back to the facts, during the federal action Ultimax and Kunbargi knew that Quikrete was purchasing cement at $185 per ton, which was a greatly reduced price that was $25 less than Ultimax’s price of $210. Knowing that discrepancy, Ultimax and Kunbargi had reason to suspect that Quikrete was receiving a rebate or unearned discount. Further, Ultimax and Kunbargi alleged in the federal action that CTS committed unfair competition by trying to deprive them of business and succeeding in this scheme by underbidding and lowering prices. Given these facts, Ultimax and Kunbargi should have suspected a section 17045 violation. Further, whether Ultimax and Kunbargi were specifically aware that Quikrete was one of the CTS customers who might be receiving an unearned rebate or discount is immaterial. (Fox, supra, 35 Cal.4th at p. 813 [“ignorance of the identity of the defendant does not delay accrual of a cause of action”].)
Ultimax and Kunbargi, of course, disagree. They cite Sime v. Malouf (1949) 95 Cal.App.2d 82 (Sime), a case which certainly occupies suitable terrain for discussion. In assessing the statute of limitations for fraud, it held that constructive notice of a fraud claim requires “‘“such a connection between the facts discovered and the further facts to be discovered that the former may be said to furnish a reasonable and natural clue to the latter.”’” (Id. at p. 106.) Rebounding off of Sime, they argue that there is no connection between underpricing made possible by the use of stolen formulas on one hand and kickbacks on the other. Pursuing this logic, they contend that a suspicion of the former does not lead to suspicion of the latter.
Ultimax and Kunbargi also cite Zeller v. Milligan (1925) 71 Cal.App. 617 (Zeller). Because Zeller did not analyze a statute of limitations issue, we did not find it useful for our analysis. The question in Zeller was whether the plaintiff attempted rescission of a contract with sufficient promptness after discovering the defendants’ fraud, and whether the plaintiff should be imputed with knowledge of the fraud under a constructive notice theory. (Id. at pp. 619, 624.)
To fully appreciate the subtleties of the issue framed, it is appropriate to keep in mind that the Unfair Practices Act is designed “‘to safeguard the public against the creation or perpetuation of monopolies and to foster and encourage competition, by prohibiting unfair, dishonest, deceptive, destructive, fraudulent and discriminatory practices by which fair and honest competition is destroyed or prevented.’ [Citation.]” (ABC Internat. Traders, Inc. v. Matsushita Electric Corp. (1997) 14 Cal.4th 1247, 1256.) Even if Ultimax and Kunbargi did not know that CTS was paying a secrete kickback or rebate, it believed that CTS was underbidding and lowering prices to specific customers in order to destroy competition. The other side of the coin is that Ultimax and Kunbargi necessarily believed that certain CTS customers were receiving unearned discounts. It slices logic too thin to say that even though they believed certain CTS customers were violating section 17045, Ultimax and Kunbargi were not on inquiry notice because they wrongly believed the violations were unearned discounts instead of kickbacks (rebates). Once they believed there was a violation, the statute of limitations began to run. We are not persuaded to a contrary view just because Ultimax and Kunbargi alleged that CTS could afford to underbid and lower prices due to patent infringement. The reason for the unearned discounts is a red herring. What matters is that unlawful pricing occurred.
Undaunted, Ultimax and Kunbargi argue that “even if Ultimax had some suspicion of a pricing scheme, there were no means of knowledge available to discover the kickbacks because CTS and Quikrete took affirmative steps (including doctored invoices) to conceal their activities.” This argument falters for a number of reasons. Ultimax and Kunbargi did not cite any law to support their contention (Guthrey v. State of California (1998) 63 Cal.App.4th 1108, 1115 [lack of a record citation results in a waiver]), they did not argue this point in their papers below (Hepner v. Franchise Tax Bd. (1997) 52 Cal.App.4th 1475, 1486 [points not raised in the trial court are waived]), and they did not provide a transcript of the September 21, 2007, hearing (Bennett v. McCall (1993) 19 Cal.App.4th 122, 127 [in the absence of an adequate record, we presume the trial court was correct]). More importantly, knowledge of unearned discounts suggested a section 17045 violation. Ultimax and Kunbargi were required to sue and determine the exact nature of the violation during discovery.
Last, Ultimax and Kunbargi argue that the kickbacks paid in 2004 were within the statute of limitations because they were a continuing violation. This argument was not raised below, so we will not entertain it on appeal. (See Doers v. Golden Gate Bridge Etc. Dist. (1979) 23 Cal.3d 180, 184–185, fn. 1 [“it is unfair to the trial judge and to the adverse party to take advantage of an error on appeal when it could easily have been corrected at the trial”].)
2. Fraudulent concealment.
The fraudulent concealment argument advanced by Ultimax and Kunbargi is easily disposed of.
When a defendant conceals a cause of action, the statute of limitations is tolled. (Snapp & Associates Ins. Services, Inc. v. Robertson (2002) 96 Cal.App.4th 884, 890.) This rule has no impact herein. It was not argued below, which is the first defect. The second defect is that even if Quikrete and CTS concealed the alleged kickback until 2004, they did not or were unable to conceal the existence of an illegal pricing scheme in violation of section 17045. Because Ultimax and Kunbargi knew there was an illegal pricing scheme when they filed the federal action, the statute of limitations began to run no later than June 13, 2002.
3. Equitable tolling.
A plaintiff’s time to file an action may be equitably tolled “when, possessing several legal remedies he... pursues one designed to lessen the extent of his injuries or damage.” (Addison v. State of California (1978) 21 Cal.3d 313, 317 (Addison).) Equitable tolling requires timely notice and lack of prejudice to the defendant plus reasonable and good faith conduct by the plaintiff. (Id. at p. 317.) A defendant receives timely notice if the plaintiff files a claim within the statute of limitations and alerts the defendant to the need to investigate the facts which later form the basis of the plaintiff’s second claim. “Generally this means that the defendant in the first claim is the same one being sued in the second.” (Tarkington v. California Unemployment Ins. Appeals Bd. (2009) 172 Cal.App.4th 1494, 1503.) Lack of prejudice “‘essentially translates to a requirement that the facts of the two claims be identical or at least so similar that the defendant’s investigation of the first claim will put him in a position to fairly defend the second.’ [Citation.]” (Id. at p. 1504.)
While Ultimax and Kunbargi place stock in Addison, this is misguided. It was not argued below as to the section 17045 claim. Further, Quikrete was prejudiced by Ultimax and Kunbargi’s delay. By investigating the patent infringement claim, Quikrete was not placed in a position to fairly defend the claim that it received rebates in violation of section 17045. While the former claim was based on misappropriation of intellectual property, the latter was based on conduct inimical to competition through an unlawful pricing scheme. It cannot be cogently or successfully argued that the two claims are sufficiently similar for Addison. They involve different damages assessments and require investigation of disparate conduct.
Ultimax and Kunbargi request that we take judicial notice of a pretrial conference order in the federal action indicating that they contemplated pursuing an illegal pricing claim. In their view, this triggers Addison. But they did not request judicial notice of this pretrial conference order below. We exercise our discretion and deny the request because it is outside of the appellate record. (Shamsian v. Atlantic Richfield Co. (2003) 107 Cal.App.4th 967, 975, fn. 5.) Regardless, the pretrial conference order would not change our analysis.
DISPOSITION
The judgment is affirmed.
Quikrete is entitled to its costs on appeal.
We concur: BOREN, P. J. DOI TODD, J.