California Court of Appeals, Fourth District, First Division
APPEAL from a judgment of the Superior Court of San Diego County No. 37-2010-00097967-CU-BT-CTL, Joan M. Lewis, Judge.
Carothers DiSante & Freudenberger, Brent M. Giddens and Dan M. Forman for Plaintiff and Appellant.
Cooley, Seth A. Rafkin, Kraig D. Jennett and Lindsay P. Parker for Defendants and Respondents.
BENKE, Acting P. J.
In this unfair competition lawsuit, the plaintiff, a large scale laundry business that provided linens to local hospitals and other health care facilities, sued a new competitor in the laundry business and one of its own former employees on a variety of theories, including a claim under the Uniform Trade Secrets Act (Civ. Code, § 3426 et seq.; UTSA). Prior to trial, the trial court granted the defendants summary adjudication on all of the plaintiff's non-UTSA claims. The trial court found those claims were pre-empted or displaced by UTSA.
A jury later found that, in fact, none of the information that the plaintiff asserted had been wrongfully appropriated was a trade secret within the meaning of UTSA, and the trial court entered a judgment in favor of the defendants.
On appeal, the plaintiff does not challenge the jury's verdict but argues the trial court erred in granting summary adjudication with respect to its non-UTSA claims. We agree with the plaintiff.
By its terms, UTSA does not displace breach of contract claims, even if they are based in part on the alleged misappropriation of a trade secret. Moreover, UTSA does not displace other claims when they are not based on an alleged misappropriation of a trade secret.
Here, the plaintiff asserted a former employee breached his employment agreement and his duty of loyalty to the plaintiff because, while still employed by the plaintiff, the employee disparaged the plaintiff to a local bank and, in negotiating new linen contracts with large customers of the plaintiff, gave the customers cancellation rights that are not customary in the industry and that permitted those customers to shortly thereafter take their business to the employee's new employer. The breach of contract and breach of fiduciary duty theories advanced by the plaintiff do not depend on any misappropriation of trade secrets and therefore are not displaced by UTSA. Those theories also independently support the plaintiff's related claims for statutory and common law unfair competition and interference with business relations.
The plaintiff also asserted that upon the employee's resignation, the employee retained thousands of pages of documents that the plaintiff owns. The plaintiff asked that the employee return the documents, and the record shows he failed to do so. Although the documents may have little if any value in light of the jury's finding the defendants did not appropriate any trade secrets, the defendant employee's possession of them will support a conversion claim independent of any trade secret.
Accordingly, we reverse the trial court's judgment in part and remand for further proceedings on the plaintiff's non-UTSA claims.
Plaintiff and appellant Angelica Textile Services, Inc. (Angelica) provides linens and laundry services to hospitals and healthcare facilities throughout the United States. It has operated in the San Diego area for many years and arguably, at all pertinent times, controlled 90 percent of the hospital linen and laundry market in San Diego.
Defendant and respondent Jay Park (Park) began working for Angelica in San Diego in 1982 when Angelica purchased his former employer, Blue Seal Linen. By 2008, Park had been promoted to the position of market vice president and was responsible for the operations of Angelica's San Diego and Phoenix laundry plants.
During the course of his employment with Angelica, Park signed a noncompetition agreement under which he promised he would "give his best endeavors, skill and attention to the discharge of his duties with the Company in a manner consistent with his position, at such place or places as may be reasonably expected or required by the Employer in the furtherance of its business."
Park also promised he would not, during his employment, "become interested, directly or indirectly, as a partner, officer, director, stockholder, advisor, employee, independent contractor or in any other form or capacity, in any other business similar to Company's business."
In 2008, while still employed by Angelica, Park engaged in a series of conversations, preparations and negotiations with representatives of two of Angelica's largest customers in San Diego, Sharp Healthcare (Sharp) and Scripps Health (Scripps). The goal of the negotiations was a proposed linen and laundry enterprise to be jointly operated by Sharp and Scripps. The new laundry would provide services not only to Sharp and Scripps but also to other Angelica customers.
Given his lengthy experience in the industry, Park prepared a business plan for the joint venture that described both Angelica's role as virtually the only provider of laundry services in the area and what Park viewed as Angelica's "limited" and "aged" facilities. The business plan also contained detailed financial projections, including likely production costs and revenues.
In September 2008, Sharp's board of directors decided not to pursue the laundry joint venture. However, two members of the Sharp board, Tom Gildred and Bob Payne, became very interested in the opportunity to compete in the laundry service business in San Diego and began discussing with Park the ...