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Parrish v. Latham & Watkins

California Court of Appeals, Second District, Third Division

August 27, 2014

WILLIAM PARRISH et al., Plaintiffs and Appellants,
v.
LATHAM & WATKINS et al., Defendants and Respondents.

[REHEARING GRANTED 9-25-14]

APPEAL from orders of the Superior Court of Los Angeles County No. BC482394, James R. Dunn, Judge.

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[Copyrighted Material Omitted]

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[Copyrighted Material Omitted]

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COUNSEL

venatti, Michael J. Avenatti, Scott H. Sims; Panish, Shea & Boyle, Brian J. Panish, Adam K. Shea, Kevin R. Boyle; Esner, Chang & Boyer and Stuart B. Esner for Plaintiffs and Appellants.

McKool Smith Hennigan, J. Michael Hennigan and Michael Swartz for Defendants and Respondents.

OPINION

KLEIN, P. J.

In a prior litigation, FLIR Systems, Inc. and Indigo Systems Corporation (collectively, FLIR) brought suit against their former employees,

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William Parrish and E. Timothy Fitzgibbons (collectively, Former Employees) for, among other things, misappropriation of trade secrets (the underlying action). Former Employees were successful in defeating the underlying action. Moreover, they obtained a ruling that the misappropriation of trade secrets claim had been brought against them in bad faith, which resulted in an order that FLIR pay Former Employees their attorney fees and costs (Civ. Code, § 3426.4) in an amount exceeding $1.6 million. That order was affirmed on appeal. (FLIR Systems, Inc. v. Parrish (2009) 174 Cal.App.4th 1270, 1274 [95 Cal.Rptr.3d 307].) Thereafter, Former Employees brought the instant malicious prosecution action against the attorneys who had represented FLIR in the underlying action, Latham & Watkins LLP, and Attorney Daniel Schecter (collectively Latham). Latham moved to strike the complaint under Code of Civil Procedure section 425.16, the so-called anti SLAPP statute.[1] The motion was granted on the basis that Former Employees were unable to establish a probability of prevailing on their malicious prosecution action, because the action was untimely brought under Code of Civil Procedure section 340.6. Former Employees appeal, arguing that Code of Civil Procedure section 340.6 is not the appropriate statute of limitations for a malicious prosecution action, and that they have presented sufficient evidence that they otherwise have a probability of prevailing. We agree and reverse.[*]

FACTUAL AND PROCEDURAL BACKGROUND

1. Underlying Facts

The trade secrets at issue involve the manufacture of a type of microbolometer, which is a device for detecting infrared radiation, used in connection with infrared cameras, night vision and thermal imaging. Specifically, the case involves the manufacture of “uncooled, TEC-less, vanadium oxide microbolometers.”[2]

Former Employees were shareholders and officers of Indigo, which was in the microbolometer business. In 2004, FLIR acquired Indigo, acquiring, among other things, Indigo’s intellectual property. Former Employees continued to work for Indigo (and, therefore, FLIR). Former Employees left the

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employ of FLIR on January 6, 2006, when their contracts expired. In 2004, while working for FLIR, Former Employees had presented FLIR with a business plan involving outsourcing the manufacture of microbolometers. When they left FLIR, Former Employees embarked on a business plan for a new business which was, allegedly, similar to the business plan they had presented to FLIR. FLIR believed that the business plan which had been presented to it by Former Employees during their employment was, in fact, FLIR’s intellectual property, and therefore could not be misappropriated by Former Employees for their own business purposes. FLIR also believed that the business envisioned by the business plan relied on intellectual property which belonged to FLIR.

FLIR and Former Employees had several meetings, in which Former Employees attempted to assure FLIR that they had no intention of using FLIR’s intellectual property in their new business venture. They also explained to FLIR that the business plan they were using had been created by Former Employee Fitzgibbons before he had even joined Indigo, and was therefore not FLIR’s intellectual property.

2. The Underlying Action is Filed by Latham

On June 15, 2006, FLIR, represented by Latham, filed the underlying action against Former Employees, alleging seven causes of action, including misappropriation of trade secrets. That cause of action alleged, on information and belief, that Former Employees had been soliciting venture capital for their new business by presenting a business plan which misappropriated FLIR’s confidential information and trade secrets.[3] The complaint alleged that Former Employees had “sought to assuage FLIR’s concerns, by representing that they would not use any of... FLIR’s confidential trade secrets, would license intellectual property from established owners, [and] would develop a ‘rigorous IP filtering procedure.’ These assurances were belied by Fitzgibbons’[s] claim that he had conceived the idea for the new business before joining Indigo, even though he had joined the company seven years earlier in 1999.”

3. Latham Changes the Theory of the Case

By the time the underlying action was filed, Former Employees were deep in negotiations with a third party, Raytheon, to proceed on a new business venture. The business venture would involve Former Employees obtaining licenses for Raytheon’s intellectual property in the area of microbolometer

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manufacture. It is not entirely clear from the record how similar the anticipated business venture with Raytheon was to the business plan which formed the basis of the complaint in the underlying action.[4] In any event, once Raytheon learned of the underlying action, it broke off all further negotiations with Former Employees.

Letters were exchanged between counsel for Former Employees and Latham. On July 16, 2006, Former Employees sought to prove to Latham that their business plan had, in fact, been formulated by Fitzgibbons prior to joining Indigo, by sending Latham a copy of the business plan which Fitzgibbons had submitted to another third party (Boeing), prior to joining Indigo. Counsel for former employees confirmed to Latham that their then-current business plan did not involve the use of FLIR’s intellectual property but, instead, depended on licensing the necessary intellectual property from a third party. By letter of August 15, 2006, counsel for Former Employees explained to Latham that Former Employees intended to license a complete technology package, including microbolometer fabrication techniques, from a major aerospace company. By letter of September 5, 2006, counsel for Former Employees identified the third party as Raytheon, and pointed out that Raytheon had been in the industry longer than FLIR or Indigo.

By letter of October 12, 2006, Latham responded to the revelation of Raytheon as the third party in question. Latham stated, “We note [Former Employees’] contention that the Raytheon technology package provides all the needed intellectual property and know-how for [Former Employees] to engage in high-volume production of [vanadium oxide] microbolometers. While that may be the case, it begs two critical questions related to FLIR’s intellectual property.” First, Latham asked if the “Raytheon package include[s] a design for TEC-less operation, ” because FLIR possessed some patents and trade secrets in this area.[5] Second, Latham asked how long it would take Former Employees “to achieve a ...


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