S.O.Tech/Special Ops. Technologies v.
Berge

 

 

 

 

 

 

 

 

Filed 10/9/13  S.O.Tech/Special Ops. Technologies v. Berge
CA2/7

 

 

 

 

 

 

>NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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  This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115>.

 

IN
THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

 

SECOND
APPELLATE DISTRICT

 

DIVISION
SEVEN

 

 
>

S.O. TECH/SPECIAL OPERATIONS TECHNOLOGIES, INC.,               Plaintiff and Appellant,               v.   MICHAEL BERGE et al.,               Defendants and Respondents.

B243795         (Los Angeles County       Super. Ct. No. BC437331)

 

APPEAL from an order of the Superior
Court of href="http://www.adrservices.org/neutrals/frederick-mandabach.php">Los Angeles
County, Kenneth R. Freeman, Judge.  Reversed.

Lurie, Zepeda, Schmalz & Hogan,
Troy L. Martin and M. Damien Holcomb for Plaintiff and
Appellant.

Law Office of Matthew K. Davis and
Matthew K. Davis for Defendants and Respondents.

 

 

__________________________

 

 

 

In this action
under the California Uniform Trade Secrets Act, appellant S.O. Tech/Special
Operations Technologies, Inc. challenges the denial of its attorney’s
fees.  Because we conclude that the trial
court erred in concluding that the jury’s failure to find a basis for awarding href="http://www.mcmillanlaw.com/">punitive damages precluded an award of
attorney’s fees under the California Uniform Trade Secrets Act, we reverse and
remand for further proceedings.

>FACTURAL AND PROCEDURAL BACKGROUND

S.O. Tech/Special Operations
Technologies, Inc. (S.O. Tech.) sued Michael Berge, doing business as Berge Innovations,
Berge Innovations, Inc., Action Bag and Cover, Inc., and Does 1-25 on May 7,
2010, alleging misappropriation of trade secrets, unfair competition,
interference with prospective economic advantage, and breach of contract; the
complaint also request an accounting. 
Berge and Berge Innovations, Inc., respondents here, answered the
complaint on June 7, 2010.  The matter was tried to the jury and, on October 6, 2011, the jury returned
its verdict, finding a misappropriation of trade secrets, and awarding S.O.
Tech damages in the sum of $29,036.  The
jury also found that S.O. Tech had failed to prove, by clear and convincing
evidence, that the respondents acted willfully and maliciously in the
misappropriation.  Finally, the jury
found that Berge had breached his contract, and awarded S.O. Tech damages of
$29,820 for that breach.  

            Following
the verdict, the trial court took further evidence and heard arguments of
counsel on S.O. Tech’s demand for a permanent injunction.  On January
17, 2012, the court found good cause to impose that
injunction.  The trial court entered
judgment in the matter on April 27,
2012, severing the cause of action for interference with
prospective economic advantage for a separate trial, and reserving jurisdiction
over the claim for attorney’s fees and costs. 


S.O. Tech
moved for attorney’s fees under the California Uniform Trade Secrets Act (Civ.
Code, § 3426.4) on May 29, 2012.  The motion asserted a right to fees based on
the jury’s finding of misappropriation, and evidence demonstrating that
misappropriation had been willful and malicious.  Respondents opposed the motion, asserting
that the jury’s verdict on punitive damages precluded such an award, and that
the fees had not been properly calculated. 
After S.O. Tech replied, the court denied the motion.  S.O. Tech timely appealed.

>DISCUSSION

            The sole issue presented by this appeal is the trial
court’s denial of an award of attorney’s fees. 
The court determined that, although the question of attorney’s fees was
not before the jury, the jury’s determination on punitive damages bound the
court, and that it had no discretion to award attorney’s fees.  Because we conclude that the jury’s finding
on the different issue did not bind the court, we will remand for the court to
reconsider the motion.

       >Standard of Review

“‘On review of an award of attorney fees after trial, the normal
standard of review is abuse of discretion. 
However, 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.’”  (Connerly
v. State Personnel Bd. (2006) 37 Cal.4th 1169, 1175, quoting Carver v.
Chevron U.S.A., Inc. (2002) 97
Cal.App.4th 132, 142.)  Thus, we exercise
independent review on the narrow question of whether S.O. Tech is entitled to
seek fees under Civil Code section 3426.4.

>California> Uniform Trade Secrets Act

S.O. Tech’s claims for
misappropriation were brought under the California Uniform Trade Secrets Act
(CUTSA), Civil Code sections 3426 to 3426.11.href="#_ftn1" name="_ftnref1" title="">>[1]  Section 3426.4, at issue here, provides:  “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 to the prevailing party.” 
To justify a fee award under this statute, the trial court must find
that the party to whom fees are awarded is the prevailing party and that a
willful and malicious misappropriation occurred.  (Vacco Industries, Inc. v. Van Den Berg (1992) 5 Cal.App.4th 34,
54-55, fn. 23 (Vacco).)

CUTSA,
adopted from the Uniform Trade Secrets Act, does not define the burden of proof
to be applied on a motion for attorneys’ fees under section 3426.4.  As a result, we look to the Evidence Code,
which mandates the application of a preponderance of the evidence
standard:  “Except as otherwise provided by law, the
burden of proof requires proof by a preponderance of the evidence.”  (Evid. Code, § 115; Conservatorship of Wendland (2001) 26 Cal.4th 519, 546.  [“The default standard of proof in civil
cases is the preponderance of the evidence”].)

While there was a jury finding in this
case, that finding, without objection by the parties, required only that the
jury determine whether there was clear and convincing evidence sufficient to
award punitive damages.  Early in the
proceedings, respondents sought a ruling from the court applying that standard
of proof to the question of punitive damages. 
In that request, respondents neither suggested, nor asked the court to
rule, that the same burden of proof should be applied to the court’s exercise
of its discretion in determining whether to award attorney’s fees. 

In the discussion of the jury instructions
themselves, the record does not demonstrate that any party asserted that the
jury’s finding on punitive damages would be binding on the issue of attorney’s
fees.  The record does indicate that the
parties and the court conducted an off the record discussion of jury
instructions.  After that discussion, the
court issued a minute order memorializing its rulings.  Two portions of that order are relevant.  First, the court ruled that the verdict form
for punitive damages would be phrased in terms of the clear and convincing
evidence standard.  Second, the court
determined that in giving CACI No. 1441, the punitive damages instruction, the
same clear and convincing language would be included. 

Respondents have identified no legal basis
to argue that the jury’s finding would be binding on the determination on
attorney’s fees, a determination to be made by the court.  Respondents have also cited no case in which
the clear and convincing standard was applied to the award of attorney’s fees
under CUTSA.href="#_ftn2" name="_ftnref2"
title="">[2]>

The trial court, in denying the request
for attorney’s fees, relied on Vacco.  In that case, the jury awarded punitive
damages for misappropriation.  In
considering the propriety of the award of attorney’s fees, and in response to
the defendants’ arguments that there was no statutory basis for the award, the
Court of Appeal stated:  “In order to
justify fees under Civil Code section 3426.4, the court must find that a
‘willful and malicious misappropriation’ occurred.  That requirement is satisfied, in our view,
by the jury’s determination, upon clear and convincing evidence, that
defendants’ acts of misappropriation were done with malice.  This finding was necessary to the award of
punitive damages which was made by the jury. 
However, it is also sufficient to justify the statutory portion of the
fee award.”  (Vacco, supra, 5 Cal.App.4th at p. 54, fn. omitted; see also >Khavarian Enterprises, Inc. v. Commline,
Inc. (2013) 216 Cal.App.4th 310, 326-327 [trial court properly decides attorney’s
fee issue].)

Defendants in Vacco also argued that the issue of attorney’s fees was a jury
issue.  The court rejected that argument,
explaining that Code of Civil Procedure section 1033.5 places that issue in the
hands of the court, not the jury.  (>Vacco, supra, 5 Cal.App.4th at p. 55.)

What was not before the court in >Vacco, however, is the issue for which
respondents and the trial court cited that case:  whether the trial court is bound in its
determination of attorney’s fees by the jury’s finding on punitive
damages.  The trial court here concluded
that:  “The implication under >Vacco is that if the jury finds that the
plaintiff does not demonstrate
willful and malicious appropriation, fees are not justified under CUTSA.”  The court further concluded that it was bound
by the jury’s determination, relying on Hoopes
v. Dolan (2008) 168 Cal.App.4th 146.href="#_ftn3" name="_ftnref3" title="">>[3]  The court erred.

The Vacco
court did not have before it the issue of what the standard of proof was
because, in the face of a determination that there was clear and convincing
evidence of malice, it was clear that there was a showing of the necessary
facts by a preponderance of the evidence. 
While the court determined that the jury’s finding was sufficient for the
court to award attorney’s fees under the statute, nothing in the facts before
the court or the language of the statute indicates it was necessary.  To the contrary, Evidence Code section 115
demonstrates it was not.

Here, the standards of proof were different, the jury’s findings
concerning malice and oppression for purposes of punitive damages were not
binding on the trial court’s determination of S.O. Tech’s motion for attorney
fees.href="#_ftn4" name="_ftnref4"
title="">[4]

DISPOSITION

The order is
reversed and the matter is remanded for the trial court to determine whether
the record demonstrates a basis for the award of attorney’s fees, and, if so,
the amount properly awarded.  Appellant
is to recover its costs on appeal.

 

 

                                                                        ZELON,
J.

We concur:

 

 

            WOODS,
Acting P. J.

 

 

            SEGAL, J.href="#_ftn5" name="_ftnref5" title="">*