ATS Products, Inc. v. Ghiorso et al

Filing 270

ORDER by Magistrate Judge Bernard Zimmerman denying 237 Motion for Judgment as a Matter of Law (bzsec, COURT STAFF) (Filed on 1/26/2012)

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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 NORTHERN DISTRICT OF CALIFORNIA 10 11 12 13 14 15 16 ATS PRODUCTS INC., ) ) Plaintiff(s), ) ) v. ) ) FRANK GHIORSO, THERMALGUARD ) TECHNOLOGY LLC, THERMALGUARD) LLC, ) ) Defendant(s). ) ) No. C10-4880 BZ ORDER DENYING DEFENDANTS’ MOTION FOR JUDGMENT AS A MATTER OF LAW 17 18 Defendants move pursuant to Rule 50(b) of the Federal 19 Rules of Civil Procedure for judgment as a matter of law on 20 the grounds that the damages awarded by the jury to Plaintiff 21 are speculative; that Plaintiff’s claims for interference with 22 contractual relations and breach of fiduciary duty are 23 preempted by the California Uniform Trade Secrets Act1; and 24 that Plaintiff cannot bring a claim for breach of fiduciary 25 duty against Ghiorso because there is no evidence that Shea 26 1 27 28 Defendants’ preemption argument pertaining to Plaintiff’s interference with contractual relations claim will not be addressed because the jury found in favor of Defendants on this claim and the issue is therefore moot. 1 1 Tech assigned its tort claims to Plaintiff.2 2 A motion for judgment as a matter of law should be 3 granted if the evidence permits only one reasonable 4 conclusion, and that conclusion is contrary to the jury’s 5 verdict.3 6 are DENIED.4 For the reasons set forth below, Defendants motions 7 Defendants first argue that the damages award is 8 speculative because there was no testimony regarding how to 9 apportion damages on a trade secret-by-trade secret basis. 10 (Def.’s Mot. at 2.) In trade secrets claims, however, damages 11 need not be calculated with absolute precision. 12 Int’l v. Velto, 525 F.2d 432, 437 (9th Cir. 1975) (“The 13 general rule that prohibits evidence of speculative profits 14 does not apply to uncertainty as to the amount of the profits Tri-Tron 15 2 16 All parties have consented to magistrate judge jurisdiction for all proceedings including entry of final judgment, pursuant to 28 U.S.C. § 636(c). 17 3 18 19 20 21 22 23 A jury verdict can be overturned and a post-trial motion for judgment as a matter of law granted “only if, under the governing law, there can be but one reasonable conclusion as to the verdict. In other words, the motion should be granted only if ‘there is no legally sufficient basis for a reasonable jury to find for that party on that issue.’” Winarto v. Toshiba Am. Elecs. Components, Inc., 274 F.3d 1276, 1283 (9th Cir. 2001). In reviewing the motion, the court must view the evidence in the light most favorable to the non-moving party and draw all reasonable evidentiary inferences in favor of the non-moving party. Reeves v. Sanderson Plumbing Products, Inc., 530 U.S. 133, 150 (2000); Josephs v. Pac. Bell, 443 F.3d 1050, 1062 (9th Cir. 2006). 24 4 25 26 27 28 A party must make a motion for judgment as a matter of law under Rule 50(a) before a case is submitted to the jury. Defendants did so here, and I deferred ruling on the motion. Defendants then renewed their motion under Rule 50(b). In ruling on the renewed motion, the court may either “allow judgment on the verdict, if the jury returned a verdict,” or “order a new trial,” or “direct the entry of judgment as a matter of law.” Fed. R. Civ. P. 50(b). 2 1 which would have been derived, but to uncertainty or 2 speculation as to whether loss of profits was the result of 3 the wrong and whether any such profits would have been derived 4 at all.”) (emphasis added); see also Trade Secrets Practice in 5 California (Cont.Ed.Bar 2nd ed. 1996), § 12.20, pp. 438-39 6 (“Although the plaintiff must prove damages, complete 7 precision is not required. 8 speculative lost profits, or speculation as to the existence 9 of damages are improper, but once the existence of damages or Evidence of speculative profits, 10 lost profits has been established, the courts are much more 11 lenient in determining the amount of damages.” (citations 12 omitted). 13 (Tri-Tron, 525 F.2d at 436; see also Stott v. Johnston, 36 14 Cal. 2d 864, 874 (1951); American Loan Corp. v. California 15 Commercial Corp., 211 Cal. App. 2d 515, 524 (1963)), and 16 unless “the amount is grossly excessive or monstrous, clearly 17 not supported by the evidence, or based only on speculation or 18 guesswork,” the jury’s award must be upheld. 19 Memorial Coliseum Comm’n v. NFL, 791 F.2d 1356, 1360 (9th Cir. 20 1986); see also Zhang v. Am. Gem Seafoods, Inc., 339 F.3d 21 1020, 1040 (9th Cir. 2003). Damages need only rest on a “reasonable basis” Los Angeles 22 Here, the jury was instructed that Plaintiff had the 23 burden to show that it was “reasonably certain” that Plaintiff 24 would have earned profits but for Defendants’ conduct, and 25 that while any damages award for lost profits “need not be 26 calculated with mathematical precision” there must be a 27 /// 28 /// 3 1 “reasonable basis for computing the loss.”5 2 presented evidence that Gilgwang/Dong Myung paid $500,000 to 3 Thermalguard Technology, LLC and to Ghiorso for the 4 misappropriated information, and Plaintiff also presented 5 evidence of lost profits through its expert witness. 6 was some evidence of the costs Defendants incurred in reaching 7 a deal with Gilgwang/Dong Myung, upon which the jury could 8 have relied in awarding damages. 9 submitted to the jury, it found that Defendants Plaintiff There Out of the 13 trade secrets 10 misappropriated 7 of them. 11 most, although not all, of the trade secrets had been 12 misappropriated (and that Ghiorso breached a fiduciary duty 13 owed to Plaintiff), its damages award was neither grossly 14 excessive nor unreasonable given the evidence presented. 15 Defendants’ motion is therefore DENIED. 16 Given that the jury found that Defendants next argue that since there was no evidence 17 that Shea Tech assigned its tort claims to Plaintiff, 18 Plaintiff is not the real party in interest and cannot bring a 19 claim against Ghiorso for breach of fiduciary duty. 20 action must be prosecuted in the name of the real party in 21 interest ... .” 22 Club Owners Assn. v. Imperial Contracting Co., 123 Cal. App. 23 3d 898, 906 (1981) (“Generally, ‘the person possessing the 24 right sued upon by reason of the substantive law is the 25 /// 26 /// “Every Code Civ. Proc. § 367; see also Del Mar Beach 27 5 28 The jury was also instructed on unjust enrichment as an alternative means of awarding damages. 4 1 real party in interest.’”).6 2 title or ownership to another person. Commercial Discount Co. 3 v. Cowen, 18 Cal. 2d 610, 614 (1941). To be effective, an 4 assignment must include manifestation by the owner of his 5 intention to transfer the right, without further action, to a 6 third party. 7 (1970). 8 party asserting rights thereunder.” 9 Trust Co., 42 Cal. 2d 284, 292 (1954). An assignment is a transfer of McCown v. Spencer, 8 Cal. App. 3d 216, 225 “The burden of proving an assignment falls upon the Cockerell v. Title Ins. & “In an action by an 10 assignee to enforce an assigned right, the evidence must not 11 only be sufficient to establish the fact of assignment when 12 that fact is in issue, but the measure of sufficiency requires 13 that the evidence of assignment be clear and positive to 14 protect an obligor from any further claim by the primary 15 obligee.” Id. 16 Here, the record established that Plaintiff received an 17 assignment of Shea Tech’s rights and that Plaintiff therefore 18 is the real party in interest and has standing to sue for 19 breach of fiduciary duty. 20 Shea Tech assigned its tort claims to Plaintiff. 21 Sale (Joint Exhibit 82), executed by L.E. Shea on behalf of 22 Shea Tech and as the trustee of the Shea Family Trust, and by 23 Jeff Shea on behalf of Plaintiff, states that Shea Tech is 24 transferring all of its assets (defined broadly as “all Plaintiff presented evidence that The Bill of 25 26 27 28 6 A plaintiff who is not the real party in interest lacks standing to sue. Lack of standing is a jurisdictional defect. Gantman v. United Pacific Reliance, 232 Cal. App.3d 1560, 1566 (1991); Pillsbury v. Kamgard, 22 Cal. App. 4th 743 (1994). 5 1 Intellectual Property,” “all contract rights,” and all of Shea 2 Tech’s goodwill, covenants not to compete, trade secrets and 3 trade names) “without limitation” and “to the fullest extent 4 permitted by law.”7 (Joint Exhibit 82, ¶¶ 1-3.) 5 breadth of this assignment, there is sufficient evidence in 6 the record from which the jury could have concluded that Shea 7 Tech manifested an intent to transfer its rights, including 8 its right to bring any tort claims against current or former 9 Shea Tech agents or employees, to Plaintiff. Given the See Cockerell, 10 42 Cal.2d at 291 (holding that no particular form of 11 assignment is required as long as the assignor manifests an 12 intention to transfer the right). 13 Finally, Defendants argue that Plaintiff’s common law 14 claim for breach of fiduciary duty is preempted by the 15 California Uniform Trade Secrets Act (“CUTSA”). 16 explicitly states that it does not preempt claims which derive 17 from “(1) contractual remedies, whether or not based upon 18 misappropriation of a trade secret, (2) other civil remedies 19 that are not based upon misappropriation of a trade secret, or 20 (3) criminal remedies, whether or not based upon 21 misappropriation of a trade secret.” 22 3426.7(b). 23 weigh in on the issue, California courts “have held that where The CUTSA Cal. Civ. Code § While the California Supreme Court has yet to 24 7 25 26 27 28 The Bill of Sale defines “Intellectual Property” as “any and all patents, trade secrets, trade names, know-how, and other property of an intellectual character owned by [Shea Tech], specifically including any and all intellectual property concerning: (a) Shea Resins, including Fireban® Contracts, contracts, covenants not to compete, goodwill, and other intangible assets concerning those items.” (Joint Exhibit 82) (emphasis added).) 6 1 a claim is based on the ‘identical nucleus’ of facts as a 2 trade secrets misappropriation claim, it is preempted by 3 CUTSA.” 4 Case No. 07-0635, 2007 U.S. Dist. LEXIS 39599, 2007 WL 1455903 5 at *9 (N.D. Cal. 2007) (citing Digital Envoy, Inc. v. Google, 6 Inc., 370 F. Supp. 2d 1025, 1033 (N.D. Cal. 2005)); see also 7 Silvaco Data Systems v. Intel Corp., 184 Cal. App. 4th 210, 8 236 (2010) (“CUTSA provides the exclusive civil remedy for 9 conduct falling within its terms, so as to supersede other Silicon Image, Inc. v. Analogix Semiconductor, Inc., 10 civil remedies ‘based upon misappropriation of a trade 11 secret.’”) (quoting Cal. Civ. Code § 3426.7) disapproved on 12 other grounds as stated in Kwikset Corp. v. Superior Court, 51 13 Cal. 4th 310, 337 (2011); K.C. Multimedia, Inc. v. Bank of Am. 14 Tech. & Operations, Inc., 171 Cal. App. 4th 939, 958 (2009) 15 (“The UTSA therefore ‘preempts’ all common law claims that are 16 ‘based on the same nucleus of facts as the misappropriation of 17 trade secrets claim for relief.’”) (quoting Digital Envoy, 18 Inc. v. Google, Inc., 370 F. Supp. 2d 1025, 1035 (N.D. Cal. 19 2005)); Jardin v. DATAllegro, Inc., Case No. 10-2552, 2011 20 U.S. Dist. LEXIS 84509 (S.D. Cal. July 29, 2011) (“. . . to 21 avoid CUTSA preemption, a claim must ‘retain sufficient 22 independent facts’ to be viable after the trade secret facts 23 are removed.’”) (quoting Gabriel Techs. Corp. v. Qualcomm 24 Inc., Case No. 08-1992, 2009 U.S. Dist. LEXIS 98379, 2009 WL 25 3326631, at *12 (S.D. Cal Sept. 3, 2009)). 26 preemption generally applies where “there is no material 27 distinction” between the wrongdoing underlying the UTSA claim 28 and the non-UTSA claim. In other words, See Phoenix Techs. Ltd. v. DeviceVM, 7 1 Case No. 09-04697, 2009 U.S. Dist. LEXIS 114996, 2009 WL 2 4723400, at *4-5 (N.D. Cal. Dec. 8, 2009). 3 Here, while there are portions of Plaintiff’s fiduciary 4 duty claim that could be subject to preemption, there are also 5 facts which were presented to the jury that are based on 6 conduct unrelated to Plaintiff’s misappropriation claim. 7 example, Plaintiff presented evidence that Ghiorso failed to 8 disclose to Shea Tech that at the time Shea Tech was 9 negotiating the sale of its intellectual property to Plaintiff For 10 for one million dollars, Gilgwang/Dong Myung was prepared to 11 offer Shea Tech two million dollars for its intellectual 12 property. 13 support a breach of fiduciary duty claim, and the court cannot 14 therefore say as a matter of law that there was no legally 15 sufficient basis for a reasonable jury to find for Plaintiff 16 on this claim.8 17 not preempted by the CUTSA, and Defendants’ motion is DENIED. 18 Dated: January 26, 2012 These facts form an independent nucleus of facts to Plaintiff’s breach of fiduciary duty claim is 19 Bernard Zimmerman United States Magistrate Judge 20 21 G:\BZALL\-BZCASES\ATS V. GHIORSO\ORDER ON Ds RULE 50 MOTION.wpd 22 23 24 25 26 27 28 8 Defendants could have avoided this result had they raised the preemption issue earlier by filing appropriate pretrial motions or objections to the proposed jury instructions. 8

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