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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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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ATS PRODUCTS INC.,

)
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Plaintiff(s),
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v.
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FRANK GHIORSO, THERMALGUARD )
TECHNOLOGY LLC, THERMALGUARD)
LLC,
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Defendant(s).
)
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No. C10-4880 BZ

ORDER DENYING DEFENDANTS’
MOTION FOR JUDGMENT AS A
MATTER OF LAW

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Defendants move pursuant to Rule 50(b) of the Federal

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Rules of Civil Procedure for judgment as a matter of law on

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the grounds that the damages awarded by the jury to Plaintiff

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are speculative; that Plaintiff’s claims for interference with

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contractual relations and breach of fiduciary duty are

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preempted by the California Uniform Trade Secrets Act1; and

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that Plaintiff cannot bring a claim for breach of fiduciary

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duty against Ghiorso because there is no evidence that Shea

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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.
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Tech assigned its tort claims to Plaintiff.2

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A motion for judgment as a matter of law should be

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granted if the evidence permits only one reasonable

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conclusion, and that conclusion is contrary to the jury’s

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verdict.3

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are DENIED.4

For the reasons set forth below, Defendants motions

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Defendants first argue that the damages award is

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speculative because there was no testimony regarding how to

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apportion damages on a trade secret-by-trade secret basis.

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(Def.’s Mot. at 2.)

In trade secrets claims, however, damages

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need not be calculated with absolute precision.

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Int’l v. Velto, 525 F.2d 432, 437 (9th Cir. 1975) (“The

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general rule that prohibits evidence of speculative profits

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does not apply to uncertainty as to the amount of the profits

Tri-Tron

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All parties have consented to magistrate judge
jurisdiction for all proceedings including entry of final
judgment, pursuant to 28 U.S.C. § 636(c).

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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).

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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).
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which would have been derived, but to uncertainty or

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speculation as to whether loss of profits was the result of

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the wrong and whether any such profits would have been derived

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at all.”) (emphasis added); see also Trade Secrets Practice in

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California (Cont.Ed.Bar 2nd ed. 1996), § 12.20, pp. 438-39

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(“Although the plaintiff must prove damages, complete

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precision is not required.

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speculative lost profits, or speculation as to the existence

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of damages are improper, but once the existence of damages or

Evidence of speculative profits,

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lost profits has been established, the courts are much more

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lenient in determining the amount of damages.” (citations

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omitted).

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(Tri-Tron, 525 F.2d at 436; see also Stott v. Johnston, 36

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Cal. 2d 864, 874 (1951); American Loan Corp. v. California

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Commercial Corp., 211 Cal. App. 2d 515, 524 (1963)), and

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unless “the amount is grossly excessive or monstrous, clearly

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not supported by the evidence, or based only on speculation or

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guesswork,” the jury’s award must be upheld.

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Memorial Coliseum Comm’n v. NFL, 791 F.2d 1356, 1360 (9th Cir.

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1986); see also Zhang v. Am. Gem Seafoods, Inc., 339 F.3d

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1020, 1040 (9th Cir. 2003).

Damages need only rest on a “reasonable basis”

Los Angeles

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Here, the jury was instructed that Plaintiff had the

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burden to show that it was “reasonably certain” that Plaintiff

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would have earned profits but for Defendants’ conduct, and

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that while any damages award for lost profits “need not be

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calculated with mathematical precision” there must be a

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“reasonable basis for computing the loss.”5

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presented evidence that Gilgwang/Dong Myung paid $500,000 to

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Thermalguard Technology, LLC and to Ghiorso for the

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misappropriated information, and Plaintiff also presented

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evidence of lost profits through its expert witness.

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was some evidence of the costs Defendants incurred in reaching

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a deal with Gilgwang/Dong Myung, upon which the jury could

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have relied in awarding damages.

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submitted to the jury, it found that Defendants

Plaintiff

There

Out of the 13 trade secrets

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misappropriated 7 of them.

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most, although not all, of the trade secrets had been

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misappropriated (and that Ghiorso breached a fiduciary duty

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owed to Plaintiff), its damages award was neither grossly

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excessive nor unreasonable given the evidence presented.

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Defendants’ motion is therefore DENIED.

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Given that the jury found that

Defendants next argue that since there was no evidence

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that Shea Tech assigned its tort claims to Plaintiff,

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Plaintiff is not the real party in interest and cannot bring a

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claim against Ghiorso for breach of fiduciary duty.

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action must be prosecuted in the name of the real party in

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interest ... .”

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Club Owners Assn. v. Imperial Contracting Co., 123 Cal. App.

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3d 898, 906 (1981) (“Generally, ‘the person possessing the

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right sued upon by reason of the substantive law is the

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“Every

Code Civ. Proc. § 367; see also Del Mar Beach

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The jury was also instructed on unjust enrichment as
an alternative means of awarding damages.
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real party in interest.’”).6

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title or ownership to another person.

Commercial Discount Co.

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v. Cowen, 18 Cal. 2d 610, 614 (1941).

To be effective, an

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assignment must include manifestation by the owner of his

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intention to transfer the right, without further action, to a

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third party.

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(1970).

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party asserting rights thereunder.”

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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

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assignee to enforce an assigned right, the evidence must not

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only be sufficient to establish the fact of assignment when

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that fact is in issue, but the measure of sufficiency requires

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that the evidence of assignment be clear and positive to

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protect an obligor from any further claim by the primary

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obligee.”

Id.

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Here, the record established that Plaintiff received an

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assignment of Shea Tech’s rights and that Plaintiff therefore

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is the real party in interest and has standing to sue for

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breach of fiduciary duty.

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Shea Tech assigned its tort claims to Plaintiff.

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Sale (Joint Exhibit 82), executed by L.E. Shea on behalf of

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Shea Tech and as the trustee of the Shea Family Trust, and by

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Jeff Shea on behalf of Plaintiff, states that Shea Tech is

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transferring all of its assets (defined broadly as “all

Plaintiff presented evidence that
The Bill of

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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).
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Intellectual Property,” “all contract rights,” and all of Shea

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Tech’s goodwill, covenants not to compete, trade secrets and

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trade names) “without limitation” and “to the fullest extent

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permitted by law.”7 (Joint Exhibit 82, ¶¶ 1-3.)

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breadth of this assignment, there is sufficient evidence in

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the record from which the jury could have concluded that Shea

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Tech manifested an intent to transfer its rights, including

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its right to bring any tort claims against current or former

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Shea Tech agents or employees, to Plaintiff.

Given the

See Cockerell,

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42 Cal.2d at 291 (holding that no particular form of

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assignment is required as long as the assignor manifests an

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intention to transfer the right).

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Finally, Defendants argue that Plaintiff’s common law

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claim for breach of fiduciary duty is preempted by the

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California Uniform Trade Secrets Act (“CUTSA”).

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explicitly states that it does not preempt claims which derive

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from “(1) contractual remedies, whether or not based upon

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misappropriation of a trade secret, (2) other civil remedies

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that are not based upon misappropriation of a trade secret, or

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(3) criminal remedies, whether or not based upon

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misappropriation of a trade secret.”

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3426.7(b).

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weigh in on the issue, California courts “have held that where

The CUTSA

Cal. Civ. Code §

While the California Supreme Court has yet to

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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).)
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a claim is based on the ‘identical nucleus’ of facts as a

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trade secrets misappropriation claim, it is preempted by

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CUTSA.”

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Case No. 07-0635, 2007 U.S. Dist. LEXIS 39599, 2007 WL 1455903

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at *9 (N.D. Cal. 2007) (citing Digital Envoy, Inc. v. Google,

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Inc., 370 F. Supp. 2d 1025, 1033 (N.D. Cal. 2005)); see also

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Silvaco Data Systems v. Intel Corp., 184 Cal. App. 4th 210,

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236 (2010) (“CUTSA provides the exclusive civil remedy for

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conduct falling within its terms, so as to supersede other

Silicon Image, Inc. v. Analogix Semiconductor, Inc.,

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civil remedies ‘based upon misappropriation of a trade

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secret.’”) (quoting Cal. Civ. Code § 3426.7) disapproved on

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other grounds as stated in Kwikset Corp. v. Superior Court, 51

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Cal. 4th 310, 337 (2011); K.C. Multimedia, Inc. v. Bank of Am.

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Tech. & Operations, Inc., 171 Cal. App. 4th 939, 958 (2009)

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(“The UTSA therefore ‘preempts’ all common law claims that are

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‘based on the same nucleus of facts as the misappropriation of

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trade secrets claim for relief.’”) (quoting Digital Envoy,

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Inc. v. Google, Inc., 370 F. Supp. 2d 1025, 1035 (N.D. Cal.

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2005)); Jardin v. DATAllegro, Inc., Case No. 10-2552, 2011

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U.S. Dist. LEXIS 84509 (S.D. Cal. July 29, 2011) (“. . . to

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avoid CUTSA preemption, a claim must ‘retain sufficient

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independent facts’ to be viable after the trade secret facts

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are removed.’”) (quoting Gabriel Techs. Corp. v. Qualcomm

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Inc., Case No. 08-1992, 2009 U.S. Dist. LEXIS 98379, 2009 WL

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3326631, at *12 (S.D. Cal Sept. 3, 2009)).

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preemption generally applies where “there is no material

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distinction” between the wrongdoing underlying the UTSA claim

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and the non-UTSA claim.

In other words,

See Phoenix Techs. Ltd. v. DeviceVM,
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Case No. 09-04697, 2009 U.S. Dist. LEXIS 114996, 2009 WL

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4723400, at *4-5 (N.D. Cal. Dec. 8, 2009).

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Here, while there are portions of Plaintiff’s fiduciary

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duty claim that could be subject to preemption, there are also

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facts which were presented to the jury that are based on

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conduct unrelated to Plaintiff’s misappropriation claim.

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example, Plaintiff presented evidence that Ghiorso failed to

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disclose to Shea Tech that at the time Shea Tech was

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negotiating the sale of its intellectual property to Plaintiff

For

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for one million dollars, Gilgwang/Dong Myung was prepared to

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offer Shea Tech two million dollars for its intellectual

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property.

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support a breach of fiduciary duty claim, and the court cannot

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therefore say as a matter of law that there was no legally

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sufficient basis for a reasonable jury to find for Plaintiff

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on this claim.8

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not preempted by the CUTSA, and Defendants’ motion is DENIED.

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Dated: January 26, 2012

These facts form an independent nucleus of facts to

Plaintiff’s breach of fiduciary duty claim is

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Bernard Zimmerman
United States Magistrate Judge

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G:\BZALL\-BZCASES\ATS V. GHIORSO\ORDER ON Ds RULE 50 MOTION.wpd

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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.
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