California Court of Appeals, Second District, Eighth Division
from a judgment of the Superior Court of Los Angeles County.
No. BC532708 Carolyn B. Kuhl, Judge. Affirmed.
& Maher, Peter K. Stris, Kenneth J. Halpern, Douglas D.
Geyser, John Stokes; and Benjamin C. Johnson for Plaintiff
Emanuel Urquhart & Sullivan, John B. Quinn, Michael T.
Zeller, B. Dylan Proctor, Daniel C. Posner and Kathleen M.
Sullivan for Defendant and Respondent.
GRIMES, Acting P. J.
trial court granted summary judgment on the complaint because
it was barred by the statute of limitation. We affirm.
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 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
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.
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 claim.
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
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
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.