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Brescia v. Angelin

March 17, 2009

WILLIAM BRESCIA, CROSS-COMPLAINANT AND APPELLANT,
v.
KEITH ANGELIN ET AL., CROSS-DEFENDANTS AND RESPONDENTS.



APPEAL from a judgment of the Superior Court of Los Angeles County, William F. Highberger, Judge. Reversed. (Los Angeles County Super. Ct. No. BC324320).

The opinion of the court was delivered by: Willhite, Acting P. J.

CERTIFIED FOR PARTIAL PUBLICATION*fn1

Code of Civil Procedure section 2019.210 (hereafter section 2019.210) provides: "In any action alleging the misappropriation of a trade secret under the Uniform Trade Secrets Act (Title 5 (commencing with Section 3426) of Part 1 of Division 4 of the Civil Code), before commencing discovery relating to the trade secret, the party alleging the misappropriation shall identify the trade secret with reasonable particularity subject to any orders that may be appropriate under Section 3426.5 of the Civil Code." (Italics added.) In the published portion of our opinion, we hold that section 2019.210 does not require in every case that a trade secret claimant explain how the alleged trade secret differs from the general knowledge of skilled persons in the field to which the secret relates. Rather, such an explanation is required only when, given the nature of the alleged secret or the technological field in which it arises, the details provided by the claimant to identify the secret are themselves inadequate to permit the defendant to learn the boundaries of the secret and investigate defenses or to permit the court to understand the designation and fashion discovery. Further, the trade secret designation is to be liberally construed, and reasonable doubts regarding its adequacy are to be resolved in favor of allowing discovery to go forward.

BACKGROUND

William Brescia appeals from the judgment of dismissal entered in favor of respondents Sylvester Stallone and John Arnold after the trial court sustained, without leave to amend, respondents' demurrer to Brescia's third amended cross-complaint. (For ease of reference, we refer to the operative pleading simply as the cross-complaint.) Brescia alleges that respondents participated with other cross-defendants in misappropriating Brescia's trade secrets, which he describes in the cross-complaint as follows: "a formula, manufacturing process, marketing plan, funding plan and a distribution and sales plan for a high protein, low carbohydrate pudding with an extended shelf life and a stable and appealing consistency and most important, when mass produced, an appetizing flavor."

Briefly, the background to this appeal is as follows. After a dispute at a trade show at which Brescia accused Keith Angelin and his company, Freedom Foods, LLC, of stealing his ideas, Angelin and Freedom Foods sued Brescia for trade libel and other claims. In response, Brescia filed his cross-complaint. Brescia alleges that he developed his pudding product, called Pro Pudding Pak, with the assistance of Christopher Scinto, a food scientist, who worked directly for Brescia. The high protein, low carbohydrate qualities of the pudding were unique, unlike any other pudding on the market. Brescia contracted with two companies, Performance Worldwide USA, Inc. (Performance) and Instone, LLC, for the sale and distribution of the pudding, subject to confidentiality and nondisclosure provisions. Thereafter, Keith Angelin, who had been Vice President of Marketing for Performance, left that company and formed his own, Freedom Foods, Inc. Angelin, Freedom Foods, Instone, and Christopher Scinto then conspired to steal Brescia's ideas, and Freedom Foods and Instone began producing and selling a pudding based on Brescia's formula and business plan.

Brescia named as cross-defendants, among others, Angelin, Freedom Foods, Scinto, and Instone. He added respondents as individual cross-defendants in November 2006, more than two years after the cross-complaint was initially filed. He alleges that respondent Stallone is Chairman of the Board of Instone, and respondent Arnold is Chief Executive Officer. Of the named cross-defendants, only respondents are parties to this appeal. Moreover, although Brescia's cross-complaint alleged several causes of action, the only one relevant here is his statutory claim against respondents under the Uniform Trade Secrets Act (Civ. Code, § 3426, et seq.) for misappropriation of trade secrets.

In April 2007, respondents filed motions for a protective order regarding Brescia's noticing their depositions and requesting production of documents relating to their finances. The motions argued, inter alia, that Brescia refused to identify his alleged trade secrets with the reasonable particularity required by section 2019.210, and that, therefore, he was not entitled to discovery in his trade secret action. (Respondents were the only cross-defendants to seek a protective order for Brescia's failure to comply with section 2019.210. Discovery had long ago commenced as to the other cross-defendants.)

In opposing respondents' motions, Brescia argued that he had adequately described his trade secrets in his cross-complaint, and also that he had produced documents in discovery (identified by Bates stamp number) that would "reveal evidence [of the] formula and manufacturing process." At a hearing in May 2007, the court ruled that Brescia had not yet adequately identified the trade secret. The court continued the protective order motions to July 2007, and ordered Brescia to make a further disclosure.

The next day, Brescia filed a notice of compliance with the court's order. This May 2007 trade secret designation, filed under seal, grouped the alleged secrets into the categories of "Marketing Strategies," "Budget and Finance," "Formula," and "Manufacturing Process." Each classification referred to attached documents (305 pages in all) that, according to Brescia, "specifically detail[ed] each and every trade secret misappropriated."

In response to Brescia's trade secret designation, respondents filed a supplemental motion for a protective order regarding the initial round of discovery, and another separate protective order motion directed against a second round of discovery. Respondents argued that Brescia still had not identified his alleged trade secrets with the reasonable particularity required by section 2019.210. Instead, he had provided 305 pages of previously-disclosed, non-confidential documents that failed to distinguish what the purported trade secrets were. Further, relying on Advanced Modular Sputtering, Inc.v. Superior Court (2005) 132 Cal.App.4th 826, 835 (Advanced Modular) respondents argued that Brescia failed to distinguish the purported trade secrets from matters generally known to skilled persons in the commercial food science industry.

In opposition, Brescia argued that, by citing to specific pages in the documents attached to his trade secret designation, he had adequately specified his trade secrets. He also noted that he had detailed the formula for his pudding in discovery responses.

Hearing respondents' motions in July 2007, the court ruled that Brescia's trade secret description was inadequate because, by citing to voluminous documents, it obscured rather than refined the description. The court continued respondents' protective order motions, and invited Brescia's counsel to "succinctly and with particularity lay out the trade secrets without surplusage," instead of "essentially hiding the alleged trade secret in plain view by putting lots of clutter around it."

In August 2007, Brescia filed under seal the trade secret designation that is at issue in this appeal. In it, he identified two alleged trade secrets: his pudding formula and his manufacturing process. He described his pudding formula, as follows: "Attached under seal as exhibit 1 is a single page, containing a list of the 15 specific ingredients that constituted Brescia's pudding formula in the last quarter of 2003. The list identifies each ingredient by its common name and the percentage it constitutes of the total pudding. The second list identifies the same 15 ingredients listed by their supplier and brand name. Brescia alleges that this formula is a trade secret." As promised, exhibit 1 contained two lists, one of which gave the common name of 15 ingredients and their respective percentages in the final product ranging from 82.6 percent to.03 percent, and the other of which gave the brand name and supplier.

The trade secret designation described Brescia's manufacturing process as follows: "Attached under seal as exhibit 2 is a single page description of the manufacturing process for pudding described above as of the last quarter of 2003. Brescia alleges that this manufacturing process is a trade secret." The attached exhibit listed each step in the mixing, testing, and code marking of the pudding.

Respondents filed additional briefing, arguing that Brescia's new trade secret designation was insufficient because neither the formula nor the manufacturing process was distinguished from matters within the general knowledge of persons skilled in the commercial food science field. Respondents requested that the court take judicial notice of certain documents from the United States Patent and Trademark Office. The documents related to a patent application made by cross-defendant Christopher Scinto, who (according to Brescia's cross-complaint) allegedly helped Brescia develop his formula, and who claimed to have developed the formula for the pudding sold by Freedom Foods and distributed by Instone. The documents showed that the Patent and Trademark Office rejected Scinto's patent application, concluding that the high protein, low carbohydrate pudding formula submitted by Scinto and its ingredients would have been "obvious" to persons of "ordinary skill" in the food science industry when the formula was developed. Respondents argued that, because Scinto's pudding formula and ingredients were obvious to persons of ordinary skill in the industry, Brescia "should be required, as part of his designation, to describe what it is about his formula that distinguishes it from matters of general knowledge within the food science industry, and thus makes it a trade secret."

On September 20, 2007, the court once again heard argument on the sufficiency of the section 2019.210 designation in connection with respondents' motions for a protective order. In the meantime, respondents had filed a demurrer to Brescia's cross-complaint, along with a motion to strike, which were also scheduled for hearing the same day.

At the September 2007 hearing, the court granted the respondents' request for judicial notice of the Patent and Trademark Office records, and stated that its tentative ruling was that Brescia's trade secret designation was inadequate. Relying on Advanced Modular, the court reasoned that Brescia's trade secret designation was defective, because it made "no attempt... to identify why certain aspects or all of the aspects of the manufacturing process are anything other than matters generally known to persons skilled in the field," and "no attempt... to indicate why the peculiar product formulation here that is stated with precision is a trade secret, as opposed to the typical ingredients involved in formulating other low-calorie, low-fat puddings." As we explain below in connection with Brescia's contention that the court's procedure was unauthorized, the parties, in an attempt to expedite any appeal, stipulated that if the court determined the trade secret designation insufficient, it could use respondents' demurrer to the cross-complaint as a procedural device to dismiss Brescia's trade secret misappropriation claim for failure to comply with section 2019.210.

The court then heard argument from Brescia's attorney, who contended that the trade secret designation was adequate. He distinguished Advanced Modular, on which the court relied in its tentative ruling,on the ground that it dealt with a very complicated technical area in which it would be difficult for a court to determine whether the designation was sufficient. Brescia, however, stated a precise formula and manufacturing process for a pudding. Further, the law did not require that information be patentable in order to constitute a trade secret.

The court commented that Brescia's submission was silent on the question whether his alleged trade secrets were known to skilled persons in the field. The court explained: "So by its silence it's doomed to failure, because there's no attempt even to commence to describe why this formula is unique and not known to others. [ΒΆ] It just is a formula. Likewise, it is a cooking or manufacturing process of many steps. Some of which apparently, according to matters of which I believe I can take judicial notice are actually fairly familiar when you are trying to make a comparable product." The court ruled that the trade secret designation was inadequate, and stated: "[P]ursuant to the advance stipulation of the parties, the demurrer [to the ...


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