California Court of Appeals, Second District, Eighth Division
Cal.Rptr.3d 316] APPEAL from a judgment of the Superior Court
of Los Angeles County. Carolyn B. Kuhl, Judge. Affirmed. (Los
Angeles County Super. Ct. No. BC532708)
Maher, Peter K. Stris, Los Angeles, Kenneth J. Halpern, Palo
Alto, Douglas D. Geyser, John Stokes, Arcata; and Benjamin C.
Johnson, Santa Monica, for Plaintiff and Appellant.
Emanuel Urquhart & Sullivan, John B. Quinn, Michael T.
Zeller, B. Dylan Proctor, Daniel C. Posner, Los Angeles, and
Kathleen M. Sullivan for Defendant and Respondent.
Acting P. J.
trial court granted summary judgment on the complaint because
it was barred by the statute of limitation. We affirm.
Litigation between plaintiff MGA Entertainment, Inc. and
defendant Mattel, Inc. began in the federal courts in 2004,
with disputes over ownership of the Bratz line of dolls and
claims of copyright infringement. In that litigation, in
August 2007, MGA served a discovery request for documents
relating to Mattel’s efforts to obtain MGA’s trade secrets
and information about unreleased products and product
development, including by Mattel trying to gain access to MGA
showrooms or toy fair displays on false pretenses.
days after serving this document request, MGA asserted a
factually detailed affirmative defense in the federal
litigation, alleging Mattel’s unclean hands. MGA alleged
Mattel engaged in all sorts of unseemly conduct, including
"monitoring, ‘spying on’ or gaining knowledge of MGA’s
trade secrets, non-public information, nonpublic activities,
unreleased products, and product development," and
"gaining access, or attempts to gain access, to MGA
showrooms, Plan-o-Grams, merchandising displays, Toy Fair
displays on false pretenses."
years and three days later, MGA asserted a
"counterclaim-in-reply" in the federal litigation,
alleging a cause of action for misappropriation of trade
secrets under the California Uniform Trade Secrets Act (Civ.
Code, � 3426 et seq.). MGA claimed Mattel employees used fake
credentials and misrepresented themselves as retailers to
gain access to MGA displays of as-yet-unmarketed products at
private showrooms at industry toy fairs. Mattel raised the
statute of limitation defense (three years), but the district
court found MGA’s claim was a compulsory
counterclaim-in-reply and related back to Mattel’s [254
Cal.Rptr.3d 317] January 12, 2007 filing of its answer and
counterclaims. As we explain below, MGA’s reliance on this
ruling was misplaced.
January 2011, MGA obtained a verdict on its trade secret
misappropriation claims of more than $80 million, and the
district court awarded an equal amount in punitive damages
for the "willful and malicious" misappropriation.
Unfortunately for MGA, the Ninth Circuit reversed the
district court’s ruling that MGA’s claim was a compulsory
counterclaim-in-reply. The Ninth Circuit vacated the verdict
and directed the district court to dismiss MGA’s trade secret
claim without prejudice. (Mattel, Inc. v. MGA
Entertainment, Inc. (9th Cir. 2013) 705 F.3d 1108,
then filed its complaint for misappropriation of trade
secrets in the superior court. Mattel filed a motion for
summary judgment, contending the three-year statute of
limitation had run by the time MGA filed its trade secret
claim in federal court on August 16, 2010.
agree with the trial court that, under California law, the
same suspicions that allowed MGA to request discovery and
plead the unclean hands defense in the federal court in 2007
were sufficient to trigger the statute of limitation.
have already described the crux of the case. We discuss
additional facts below in light of the California rule that
the statute of limitation begins to run when the plaintiff
has reason to suspect an injury and some wrongful
cause, unless the plaintiff proves a reasonable investigation
at that time would not have revealed a factual basis for the
1. The Federal Litigation
filed an unopposed request for judicial notice of various
documents filed in the federal litigation, all of which
appear in the parties’ respective appendices. We grant the
contends that, despite its assertions in August 2007, both in
its unclean hands defense and its discovery request in
federal court, the statute of limitation did not begin to run
until almost three years later, on July 12, 2010. On that
day, deposition testimony from Salvador Villasenor, a former
Mattel employee (until 2006) who oversaw and directed
Mattel’s "market intelligence" activities,
"blew the case open."
Villasenor testified that, beginning in 1992, Mattel
employees had obtained catalogues of products made by
Mattel’s competitors by visiting their private showrooms at
toy fairs, gaining entry by creating fictitious business
cards and presenting themselves as toy store owners. Mr.
Villasenor engaged in those activities himself for six or
seven years, beginning in 1999, with the knowledge of company
executives, and he identified others who had also done so for
Mattel (although he denied he had done so in any MGA
Further, MGA points out that although it requested documents
in November 2006 relating to whether Mattel had access to any
displays or showrooms containing any of MGA’s Bratz lines,
Mattel did not produce relevant documents until early 2010,
and the documents produced then were silent about how Mattel
acquired MGA information. (Mattel claims such documents were
irrelevant because at the time there was no trade secret
claim in the litigation.)
after the Villasenor deposition did Mattel begin to produce
"smoking gun" documents, including Mattel’s toy
fair reports, a guide directing employees on how to create
false identities and businesses to gain access to
competitors’ showrooms, a December 2005 e-mail from Mr.
Villasenor [254 Cal.Rptr.3d 318] expressing ...