Opinion
H050703 H050936
05-10-2024
BBBB BONDING CORPORATION, Plaintiff and Appellant, v. ASHLEY PILLING-MILLER et al. Defendants and Respondents.
NOT TO BE PUBLISHED
Santa Clara County Super. Ct. No. 17CV318613
DANNER, J.
In this misappropriation of trade secrets case, plaintiff BBBB Bonding Corporation (BBBB) appeals from an order granting nonsuit on all claims considered at trial in favor of BBBB's former employees, Ashley Pilling-Miller (Miller) and Ryan Leary (Leary), and their new employer Premiere Bail Bonds, Inc. (Premiere) (together, defendants). The trial court granted defendants' motion for nonsuit after finding that the confidential marketing information allegedly taken by Miller and Leary when they left BBBB to join Premiere is not a protectable trade secret under the California Uniform Trade Secret Act (UTSA) (Civ. Code, § 3426 et seq.). The court further found that the UTSA preempted BBBB's other causes of action at trial.
Unspecified statutory references are to the Civil Code.
On appeal, BBBB contends the trial court ignored the evidence supporting its misappropriation claim and usurped the role of the jury by granting the nonsuit motion on a predominantly factual issue. BBBB also challenges the trial court's prior grant of summary adjudication of BBBB's breach of contract claim based on confidentiality agreements signed by Miller and Leary and the court's denial of issue and evidentiary sanctions related to defendants' alleged loss or destruction of evidence. In a separate appeal, which we also consider here, BBBB challenges the trial court's costs award.
For the reasons explained below, we reject BBBB's claims and affirm the orders granting nonsuit as to BBBB's misappropriation of trade secrets claim and related causes of action, granting summary adjudication of the breach of contract cause of action, denying the requested imposition of sanctions for spoliation of evidence, and awarding costs.
I. FACTS AND PROCEDURAL BACKGROUND
This factual background is drawn from the evidence at trial and the record on appeal. Facts related to BBBB's breach of contract claim are taken from the record that was before the trial court when it ruled on the motion for summary adjudication. In reciting facts relevant to our review of the motion granting nonsuit, we accept as true the evidence most favorable to BBBB and disregard conflicting evidence. (Nally v. Grace Community Church (1988) 47 Cal.3d 278, 291 (Nally).)
BBBB, founded in 1998 as Bad Boys Bail Bonds, Inc., is a leading provider of bail bonds in Northern and Southern California. Since its founding in San Jose, BBBB has grown to over 100 employees and expanded to six offices serving counties throughout the state.
BBBB attributes its success to innovative marketing techniques, including its development over many years of a confidential list of attorneys who have referred clients to BBBB for bail bonds, or who have the potential to refer clients in the future. BBBB's CEO and co-owner Jeffrey Stanley has been cultivating relationships with criminal defense attorneys for many years. He, together with George Wallace, who joined the company at its inception in 1998 and acted as BBBB's general manager, marketing director, and vice president, built and maintained a written list of attorneys with whom they cultivated relationships.
Sometime after 2000, BBBB created a dedicated role for attorney marketing to maintain and cultivate relationships with criminal defense attorneys. Among other responsibilities, the attorney marketer would meet attorneys in court after attending arraignments, sponsor and host continuing legal education and other events, take attorneys to sporting events, bars, and restaurants, and attend personal events such as birthday parties and weddings.
In 2006 or 2007, BBBB began to maintain its attorney list as an Excel spreadsheet. The spreadsheet contained the first and last names, law firms, and addresses of attorneys who had referred bail to BBBB or who might do so in the future (hereafter, attorney list). BBBB also sought to track personal information relevant to attorney marketing, such as an attorney's marital status, children, favorite restaurants, and other such details. This additional information, however, did not appear on the attorney list. Only approximately five BBBB employees had access to the "highly guarded" attorney list, which was password protected and maintained on a BBBB database.
BBBB collected data on "every single dollar that has been brought in" by each bail bond issued. This information was kept in a database called "Captira." The financial and other data in the Captira database could be paired with the attorney list to provide a "road map" of where BBBB's attorney marketing department should concentrate its marketing efforts. Stanley estimated that BBBB had spent "millions and millions of dollars" over the past 20 years on advertising and marketing to attorneys.
In 2005 or 2006, Leary joined BBBB as an entry-level employee providing support for bail agents. Leary eventually became a bail agent and in 2010 became the attorney marketer for BBBB's Northern California offices.
In 2013, Miller joined BBBB as a bail agent. Miller reported to Leary. In October 2014, she became Leary's attorney marketing assistant for Northern California. As attorney marketers, Miller and Leary had access to the attorney list.
As the attorney marketer for Northern California, Leary was part of the management team and participated in monthly management meetings. Leary and those individuals with access to the attorney list-including Leary's assistant, Miller, and Stanley's assistant, Rizelle Pecson-would periodically update the attorney list. At the time that Leary and Miller worked for BBBB, the attorney list for Northern California contained about 800 to 900 names.
Leary and Miller signed confidentiality agreements in connection with their employment at BBBB. The confidentiality agreement described "trade secret information" as "information of a confidential, proprietary or secret nature which is or may be either applicable or related to the present or future business of the company .... Such trade secret information includes . . . compilations of information, records, specifications, and information concerning customers and/or vendors." The agreement provided, "I agree that I will not disclose any of the above mentioned trade secrets, directly or indirectly, or use them in any way, either during the term of my employment or at any time thereafter, except as required in the course of my employment with the company."
Premiere is a private corporation founded in 1993 that primarily served the Southern California bail bond market. On June 26, 2017, Leary and Miller resigned their positions at BBBB without giving prior notice and joined Premiere. In the weeks prior to their departure from BBBB, Leary and Miller had signed employment agreements with Premiere and completed other employment paperwork for their appointments as bail agents for Premiere. Leary had also communicated with Premiere's CEO during that time about employment terms, shared earnings data based on Leary's personal monthly statistics (i.e., total premiums for bonds he had negotiated), and searched for potential office space.
Premiere established its first Northern California offices in San Jose and Santa Clara after Leary and Miller joined the company. Before that time, Premiere posted very few bonds in Northern California. After Leary and Miller began working for Premiere, BBBB experienced a "significant dropoff" in revenues from bonds referred by attorneys who subsequently began referring business to Premiere.
A forensic analysis conducted on Miller's desktop computer at BBBB shortly after she and Leary departed showed that on June 21, 2017, Miller accessed the attorney list from BBBB's server, created a blank spreadsheet on her computer, and saved a new spreadsheet to a USB drive under the file name emailmaster.XLSX. The attorney list that Miller accessed had last been updated in December 2016. The forensic evidence showed there was another file also created at the same time titled "importantattorneyemails.docx" on the USB drive inserted into Miller's computer.
According to BBBB's forensic consultant, Miller appeared to have copied some portion (or possibly all) of the attorney list and other documents open at the time (like the "importantattorneyemails.docx") to the newly created "emailmaster" spreadsheet. The forensic analysis of Leary's computer similarly showed that on May 9, 2017, Leary accessed the attorney list located on BBBB's server and copied it to a USB device, then disconnected the device. Miller testified that she sometimes used a USB flash drive to transfer files in the course of her work for BBBB but did not recall saving the attorney list on June 21 to the USB drive or doing any of the other actions described by the forensic consultant. In response to discovery requests and at trial, Miller stated that she had searched for the USB drive and did not have it in her possession, believing she had left it in the BBBB office with her files and paperwork. BBBB's forensic consultant testified the USB drive was necessary to review any files saved to the drive and determine what activities were performed with those files.
B. Procedural History
In September 2019, BBBB filed the operative complaint against Miller, Leary, and Premiere. BBBB alleged that defendants misappropriated trade secrets and other valuable proprietary and confidential information belonging to BBBB and unlawfully used the trade secrets for their own benefit and to BBBB's detriment, causing the company substantial damages. BBBB further alleged that Miller and Leary breached their fiduciary duties and employment agreements.
BBBB filed its initial complaint against Miller in November 2017. It filed the first amended (operative) complaint, adding Leary and Premiere, almost two years later.
The complaint asserted eight causes of action: (1) violations of the UTSA (§ 3426 et seq.); (2) conversion; (3) intentional interference with prospective business advantage; (4) violation of Labor Code section 2860; (5) violation of Business &Professions Code section 17200 et seq.; (6) breach of contract; (7) breach of fiduciary duty; and (8) violation of the Computer Data Access and Fraud Act (Pen. Code, § 502).
Defendants moved for summary judgment or, in the alternative, summary adjudication as to all claims (hereafter, summary judgment motion), which BBBB opposed. In a written decision, the trial court denied the motion as to all but one cause of action. It granted summary adjudication as to the sixth cause of action for breach of contract. Citing the California Supreme Court's decision in Edwards v. Arthur Andersen LLP (2008) 44 Cal.4th 937 (Edwards) and subsequent case law concerning the viability of noncompetition agreements in California, the court reasoned that although the confidentiality provision signed by Leary and Miller was narrowly drawn and did not on its face prohibit competition, enforcement of the prohibition against disclosure or use of any information concerning BBBB's customers would "make[] it seemingly impossible for defendants Leary and Miller to compete without violating the contract provision." The court concluded that the confidentiality agreement violated California's prohibition against restraints on competition and granted summary adjudication on that cause of action.
The parties proceeded to a jury trial on BBBB's remaining claims. BBBB moved in limine for an issue sanction or, alternatively, for an evidentiary inference against defendants for the alleged spoliation of evidence and resulting prejudice to BBBB (hereafter, sanctions motion) based on Miller's failure to produce the USB device identified in BBBB's forensic analysis. BBBB asserted that by failing to preserve confidential data and recover the USB drive used by Miller on June 21, defendants had engaged in evidence spoliation, warranting an order, pursuant to Code of Civil Procedure section 2023.030, establishing that defendants had misappropriated and used BBBB's confidential and trade secret information for their own financial gain. Alternatively, BBBB requested an evidentiary inference pursuant to Evidence Code section 413 that the missing or destroyed evidence was unfavorable to defendants.
The trial court denied the issue sanction. It found BBBB had not suffered prejudice because it had other evidence to prove the taking of the alleged trade secret. The court further found whether other data had been taken to be "very speculative." The court deferred until the close of evidence a ruling on whether to instruct the jury with an evidentiary inference.
BBBB's evidence at trial included the testimony of BBBB's founder and CEO (Stanley), BBBB's chief financial officer (Kevin Pope), Premiere's founder and CEO (Sean Cook), defendants Leary and Miller, BBBB's computer forensics expert (Peter Smith) and forensic accounting expert (Nicholas Buzas), BBBB's local office manager (Yvonne Martinez), and deposition testimony of BBBB's vice president (Wallace), who passed away shortly before trial. After BBBB rested its case, defendants moved for nonsuit. The trial court heard argument outside the presence of the jury. After providing a detailed oral explanation of its findings, the court granted the nonsuit motion as to all causes of action.
In its written order, the trial court incorporated by reference its oral ruling. On BBBB's trade secret misappropriation claim, the court found that "the customer list taken by [d]efendants when they left their employment at [BBBB] was not a protectable trade secret." It reasoned that while a list of names and addresses could be protected as a trade secret if it included nonpublic information (such as revenue generated or number of bonds referred by each attorney), the list in this case "only contained the names and addresses of attorneys" and moreover did not distinguish between attorneys who had and had not referred business to BBBB.
The trial court further found that any financial information provided by Leary to Premiere was limited to Leary's "personal 'statistics' that he was allowed to possess" and did not constitute a protectable trade secret. On BBBB's breach of fiduciary duty and breach of loyalty causes of action, the court found there was no evidence presented from which a jury could find that Miller or Leary were fiduciaries, or that they breached a duty of loyalty despite there being no protectable trade secret.
The trial court concluded that the UTSA preempted BBBB's other common law causes of action based on the same nucleus of facts as the misappropriation of trade secrets claim. It rejected BBBB's argument that defendants had waived the preemption defense. The court also granted nonsuit on BBBB's Penal Code section 502 cause of action for unauthorized access to and use of BBBB's computer system data and network. It explained that there was no evidence to support a jury finding that Miller and Leary had acted outside the scope of their employment with BBBB, even if BBBB did not authorize their actions.
The trial court entered judgment in favor of defendants and dismissed the complaint. Following the entry of judgment, defendants submitted a memorandum of costs. After further briefing on BBBB's motion to tax costs, the trial court granted in part and denied in part the motion to tax costs, deducting $10,323 from the $44,989 in costs claimed.
BBBB appealed from the judgment and appealable orders (No. H050703), including the orders granting nonsuit and summary adjudication. BBBB separately appealed from the order on the motion to tax costs (No. H050936). This court denied BBBB's motion to consolidate its costs and merits appeals and, on its own motion, ordered the appeals considered together for oral argument and disposition.
II. DISCUSSION
BBBB raises four issues in its main appeal. It contends the trial court erred in granting nonsuit of its misappropriation of trade secrets claim under the UTSA. It also maintains the court erred in finding the UTSA preempted BBBB's common law tort causes of action. BBBB asserts the trial court erred in deeming BBBB's confidentiality agreements with Leary and Miller to be invalid under Business and Professions Code section 16600 and in granting summary adjudication of BBBB's breach of contract claim on that ground. BBBB lastly contends that the court erroneously denied the motion for an issue sanction based on spoliation of evidence. In the costs appeal, BBBB asserts that the court erred by failing to reduce, or "tax," certain nonrecoverable costs.
We address the motion for summary adjudication first, turning next to the issues of nonsuit and sanctions, and lastly addressing the costs appeal.
A. Summary Adjudication of Breach of Contract Claim
Whether the trial court erred in granting summary adjudication to defendants on the sixth cause of action for breach of contract turns on the enforceability of the confidentiality agreements. In its complaint, BBBB alleged that Leary and Miller violated their confidentiality agreements while still employed at BBBB by copying BBBB's proprietary electronic data and confidential information and later using that information to solicit BBBB's referring attorneys to refer bail bond services to Premiere. Defendants moved for summary adjudication of the breach of contract cause of action, asserting the confidentiality agreements were invalid and unenforceable as an unlawful restraint of trade in violation of Business and Professions Code section 16600.
On appeal, BBBB contends that in granting summary adjudication on this ground, the trial court overlooked the continuing viability of what courts have called the" 'trade secret exception'" to Business and Professions Code section 16600's otherwise broad proscription on the enforcement of noncompetition clauses. Defendants counter that the trial court correctly applied the law as set forth in the statutory prohibition against noncompetition clauses in employment agreements and interpreted by case authority.
1. Principles of Summary Adjudication and Standard of Review
Summary adjudication operates under the same principles as summary judgment and is warranted where there are no triable issues of material fact, and the moving party is entitled to judgment as a matter of law. (Code Civ. Proc., § 437c, subds. (c), (f); see Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843 (Aguilar).) Whether the trial court erred in granting a motion for summary adjudication is a question of law we review de novo. (Jacks v. City of Santa Barbara (2017) 3 Cal.5th 248, 273.)
A motion for summary adjudication proceeds "in all procedural respects as a motion for summary judgment." (Code Civ. Proc., § 437c, subd. (f)(2).) "The moving party 'bears an initial burden of production to make a prima facie showing of the nonexistence of any triable issue of material fact; if [the movant] carries [this] burden of production,' the burden of production shifts to the opposing party 'to make a prima facie showing of the existence of a triable issue of material fact.'" (Choochagi v. Barracuda Networks, Inc. (2020) 60 Cal.App.5th 444, 453, quoting Aguilar, supra, 25 Cal.4th at p. 850.) In determining whether the moving and opposing parties have met their respective burdens, the court must consider all the evidence and inferences reasonably drawn therefrom, viewing the evidence and inferences in the light most favorable to the party opposing summary adjudication and resolving any doubts concerning the evidence in favor of that party. (Choochagi, at p. 453; see Aguilar, at p. 843.)
As there are no material facts in dispute concerning the confidentiality agreements, their enforceability under Business and Professions Code section 16600 is a legal question that we review de novo. (Brown v. TGS Management Company, LLC (2020) 57 Cal.App.5th 303, 318 (Brown).) BBBB, as the appellant, bears the burden of establishing error on appeal, even though defendants Miller and Leary had the burden of proving their right to summary adjudication before the trial court. (Case v. State Farm Mutual Automobile Ins. Co., Inc. (2018) 30 Cal.App.5th 397, 401-402.)
2. Application of Business &Professions Code section 16600
Under California law, covenants not to compete are generally unenforceable. "Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void." (Bus. &Prof. Code, § 16600, subd. (a).) By recent amendment, the statute directs that the prohibition "shall be read broadly, in accordance with Edwards v. Arthur Andersen LLP (2008) 44 Cal.4th 937, to void the application of any noncompete agreement in an employment context, or any noncompete clause in an employment contract, no matter how narrowly tailored, that does not satisfy an exception in this chapter." (Bus. &Prof. Code, § 16600, subd. (b)(1).) Business and Professions Code section 16600 thus "expresses California's strong public policy of protecting the right of its citizens to pursue any lawful employment and enterprise of their choice." (Dowell v. Biosense Webster, Inc. (2009) 179 Cal.App.4th 564, 575 (Dowell).)
Subdivision (b)(1) of Business and Professions Code section 16600, declaring that the statute be read in accordance with the California Supreme Court's decision in Edwards, and other complementary changes to section 16600, took effect on January 1, 2024. (See Stats. 2023, ch. 828, § 1.)
In Edwards, the California Supreme Court held that Business and Professions Code section 16600 "prohibits employee noncompetition agreements unless the agreement falls within a statutory exception." (Edwards, supra, 44 Cal.4th at p. 942.) The court explained that California "courts have consistently affirmed that Business and Professions Code section 16600 evinces a settled legislative policy in favor of open competition and employee mobility." (Id. at p. 946.) "The law protects Californians and ensures 'that every citizen shall retain the right to pursue any lawful employment and enterprise of their choice.'" (Ibid.) Thus, apart from those exceptions enumerated in the statute, covenants not to compete are void in California. (Id. at p. 945.)
BBBB concedes that none of the statutory exceptions apply to this dispute. Nevertheless, BBBB contends that although our Supreme Court in Edwards rejected the non-statutory "narrow-restraint" exception to Business and Professions Code section 16600 and reiterated the strong public policy in favor of open competition, the court "did not take the next step and address the viability - or the scope - of the 'trade secret exception' to [Business and Professions Code] section 16600." Indeed, the court in Edwards declined to address "the applicability of the so-called trade secret exception to section 16600," since the plaintiff in that case did not dispute that aspect of his noncompetition agreement. (Edwards, supra, 44 Cal.4th at p. 946, fn. 4.)
Subsequent cases have addressed the continuing viability of the trade secret exception under California law post-Edwards. (See, e.g., Retirement Group v. Galante (2009) 176 Cal.App.4th 1226 (Galante), Dowell, supra, 179 Cal.App.4th 564, Brown, supra, 57 Cal.App.5th 303.) Although these cases have not definitively resolved the issue, courts have held that to the extent the common law trade secret exception remains viable, any trade secret or confidentiality provision must be narrowly tailored and limited to the protection of trade secrets (i.e., to restrain tortious conduct), and not so broadly worded as to restrain competition.
For example, in Dowell, the challenged noncompetition and nonsolicitation clauses included language that prohibited the plaintiffs (former employees of the firm Biosense) from rendering services to any competing organization for 18 months after termination of employment using confidential information to which the plaintiffs had access during their employment. (Dowell, supra, 179 Cal.App.4th at p. 568.) The agreements defined" '[c]onfidential information'" "as information disclosed to or known by the employee, including such information as . . . the names of customers, customer preferences, needs, requirements, purchasing histories or other customerspecific information." (Id. at p. 578.) Biosense contended the clauses were "narrowly tailored to protect trade secrets and confidential information because they [we]re 'tethered' to the use of confidential information, and [we]re triggered only when the former employee's services for a competitor implicate[d] the use of confidential information." (Ibid.)
The Dowell court disagreed. It "doubt[ed] the continued viability of the common law trade secret exception to covenants not to compete" and concluded that, even assuming the exception is viable, it would not apply to the case "because the noncompete and nonsolicitation clauses . . . are not narrowly tailored or carefully limited to the protection of trade secrets, but are so broadly worded as to restrain competition." (Dowell, supra, 179 Cal.App.4th at p. 577.) The court reasoned that given the agreement's expansive list of confidential information, it would be "nearly impossible" for former employees who, like the plaintiffs, worked directly with customers, to not possess such information. (Id. at p. 578.) The court affirmed the trial court's determination that the clauses were facially void under Business and Professions Code section 16600. (Id. at p. 579.)
Brown, which arose from a judgment on an arbitration award in an employment contract dispute between the defendant employer and its former employee (Brown), similarly involved a "strikingly broad" definition of" '[c]onfidential information'" in an employment agreement. (Brown, supra, 57 Cal.App.5th at p. 316.) The court considered the effect of the confidentiality provisions under Business and Professions Code section 16600 on Brown's right to work in his profession of statistical arbitrage (a form of equities trading). (Id. at pp. 316-317.) The court observed that the agreement defined" '[c]onfidential information'" to mean "information, in whatever form, used or usable in, or originated, developed or acquired for use in, or about or relating to, the Business" (id. at p. 316), and it defined" 'The Business'" to broadly encompass all aspects of working in the securities industry. (Ibid.) The court concluded that these definitions, considered in context of the relevant field of work, "[c]ollectively . . . operate as a de facto noncompete provision; they plainly bar Brown in perpetuity from doing any work in the securities field, much less in his chosen profession of statistical arbitrage." (Id. at p. 319.) The court deemed the confidentiality provisions facially invalid and void under Business and Professions Code section 16600. (Ibid.)
In reaching this conclusion, the court in Brown rejected the argument that voiding the confidentiality provisions would strip the defendant employer of the ability to protect its confidential information and trade secrets. (Brown, supra, 57 Cal.App.5th at p. 319.) It explained that "a properly drawn confidentiality agreement which preserves an employee's right to compete" may still be enforceable. (Ibid.) The court also pointed to tort remedies to prevent former employees from disclosing trade secrets and other confidential information. (Ibid., citing the UTSA and unfair competition law (Bus. &Prof. Code, § 17200 et seq.).)
In Galante, former affiliates of a securities firm challenged the imposition of a preliminary injunction barring them from soliciting the plaintiff's customers" 'to transfer any securities account or relationship'" to themselves or to" 'any broker-dealer or registered investment advisor other than'" the plaintiff. (Galante, supra, 176 Cal.App.4th at p. 1229.) In reviewing the injunction, the appellate court considered the interplay between California's public policy favoring free competition as embodied in Business and Professions Code section 16600, and California courts' longstanding enforcement of trade secret protections against misappropriation and unfair competition. (Id. at p. 1233.) The court reasoned that Business and Professions Code section 16600 "bars a court from specifically enforcing (by way of injunctive relief) a contractual clause purporting to ban a former employee from soliciting former customers to transfer their business away from the former employer to the employee's new business, but a court may enjoin tortious conduct (as violative of either the Uniform Trade Secrets Act and/or the Unfair Competition Law) by banning the former employee from using trade secret information to identify existing customers, to facilitate the solicitation of such customers, or to otherwise unfairly compete with the former employer." (Id. at p. 1238.)
Applying this framework, the court held that the conduct of the former affiliates could be enjoined "not because it falls within a judicially-created 'exception' to [Business and Professions Code] section 16600's ban on contractual nonsolicitation clauses, but [] instead [] because it is wrongful independent of any contractual undertaking." (Galante, supra, 176 Cal.App.4th at p. 1238.)
We apply the frameworks discussed in Dowell, Brown, and Galante. The cases' skepticism of any nonstatutory exception to Business and Professions Code section 16600 post-Edwards is reinforced by the 2023 amendments to the statute, which took effect on January 1, 2024. Business and Professions Code section 16600, subdivision (b)(1) expressly declares the Legislature's intent that this section "shall be read broadly, in accordance with Edwards . . ., to void the application of any noncompete agreement in an employment context, or any noncompete clause in an employment contract, no matter how narrowly tailored, that does not satisfy an exception in this chapter." The amendments further clarify that the new language "does not constitute a change in, but is declaratory of, existing law." (Id., subd. (b)(2).)
Based on the plain language of the statute, an employment contract containing a noncompetition clause, "no matter how narrowly tailored, that does not satisfy an exception" to the statute is void and unenforceable. (Bus. &Prof. Code, § 16600, subd. (b)(1).) So, too, a confidentiality provision that effectively operates as a "noncompete clause" by restraining the employee from engaging in their trade or profession after termination of employment must be declared void under Business and Professions Code section 16600. (See Dowell, supra, 179 Cal.App.4th at p. 579; Brown, supra, 57 Cal.App.5th at p. 319.)
We independently decide that the confidentiality agreements signed by Miller and Leary, while not as expansive as those deemed void in Dowell and Brown, nonetheless invade the statutory prohibition against contractual noncompetition agreements. The confidentiality provision states, "I, the undersigned employee, understand that in the course of my employment with Bad Boys Bail Bonds I may have access to and become acquainted with information of a confidential, proprietary or secret nature which is or may be either applicable or related to the present or future business of the company .... Such trade secret information includes, but is not limited to, devices, inventions, processes, compilations of information, records, specifications and information concerning customers and/or vendors. [¶] I agree that I will not disclose any of the above mentioned trade secrets, directly or indirectly, or use them in any way, either during the term of my employment or at any time thereafter, except as required in the course of my employment with the company." (Boldface &underscoring omitted.)
BBBB contends that because the confidentiality provision does not, on its face, restrain Leary or Miller from providing services to a competitor, summary adjudication should have been denied. BBBB maintains that the confidentiality agreement signed by Leary and Miller falls within what the Brown court suggested would be a "properly drawn confidentiality agreement" that is enforceable because it "preserves an employee's right to compete after leaving" their employment. (Brown, supra, 57 Cal.App.5th at p. 319.) BBBB further asserts that because the trial court recognized that it would be" 'nearly impossible'" for employees like Leary and Miller not to possess information coming within the scope of the confidentiality provision, the court effectively "admitted" or "concede[d]" that Leary and Miller possessed trade secret information by virtue of their work with BBBB's customers-an outcome "indefensibly inconsistent" with the court's later granting of the nonsuit motion. BBBB maintains that Leary and Miller "exceeded the scope of their permissible competition" by utilizing that information to pursue BBBB's top customers.
We disagree with BBBB's contention that the grant of summary adjudication for breach of contract is inconsistent with the court's later grant of nonsuit. BBBB questions how one bench officer could have found that Leary and Miller inevitably learned confidential information through their work at BBBB such that" 'it [is] seemingly impossible for Leary and Miller to compete without violating the contract,'" while another bench officer granted nonsuit after concluding that the attorney list and other information learned by Leary and Miller during their employment with BBBB did not constitute a protectable trade secret.
BBBB's argument overlooks the distinction between the summary adjudication and nonsuit rulings and conflates contractual language on confidentiality with factual findings based on the available evidence. In granting summary adjudication, the trial court found that by operation of the contractual language, it would be" 'nearly impossible'" for employees like Miller and Leary, who have worked with BBBB's customers and vendors, to continue to operate in the same bail bond space without violating the contract. In granting nonsuit, the trial court found based on the evidence presented at trial that BBBB could not carry its burden of proof because the attorney list, and other allegedly proprietary information about BBBB's customers, did not qualify as a trade secret under the UTSA.
These rulings, juxtaposed against one another, illustrate what the Court of Appeal in Galante ascertained from its examination of Business and Professions Code section 16600 and California trade secret law: That even as "section 16600 bars a court from specifically enforcing . . . a contractual clause purporting to ban a former employee from soliciting former customers to transfer their business away from the former employer to the employee's new business, . . . a court may enjoin tortious conduct (as violative of either the Uniform Trade Secrets Act and/or the Unfair Competition Law) by banning the former employee from using trade secret information to identify existing customers, to facilitate the solicitation of such customers, or to otherwise unfairly compete with the former employer." (Galante, supra, 176 Cal.App.4th at p. 1238.)
BBBB's confidentiality agreements do not merely restrain the disclosure and use of BBBB's proprietary information constituting a trade secret under the UTSA. Rather, they more broadly address any potential disclosure or use of BBBB's "information of a confidential, proprietary or secret nature," including but not limited to "compilations of information, records, specifications and information concerning customers and/or vendors." The scope of information included within and subject to the confidentiality agreements is broader than any protection from trade secret misappropriation afforded under the UTSA. Because the definition of "trade secret information" in the confidentiality agreements is imprecise and lacks parameters tying it to the statutory definition of a trade secret, potentially any information concerning customers or vendors that BBBB asserts to be confidential or proprietary would fall under the contractual restriction on use or disclosure. Far from "conceding" possession of trade secret information by Leary and Miller, the trial court's ruling recognized the breadth of material covered by the provision.
For example, it is not disputed that Miller and Leary, as bail agents and in their attorney marketing roles at BBBB, learned the identities of and built relationships with criminal defense attorneys practicing in Northern California who were actual or potential referral sources to bail bond companies like BBBB. As examined in detail in our discussion of the trial court's nonsuit order, post, the extent to which information relating to those customers and potential customers of BBBB constitutes a protectable trade secret under the UTSA depends on factors including whether those defense attorney identities are generally known and/or accompanied by information that is nonpublic and of actual or potential economic value. (§ 3426.1, subd. (d)(1), (2).) However, under the terms of the confidentiality agreements, Miller and Leary are restricted from using or disclosing any information concerning customers and/or vendors claimed by BBBB to be of a confidential, proprietary or secret nature, regardless of whether that information actually "[d]erives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use" (§ 3426.1, subd. (d)(1)) and is "the subject of efforts that are reasonable under the circumstances to maintain its secrecy." (Id., subd. (d)(2).)
By prohibiting Miller and Leary from disclosing or "using in any way" information concerning customers and/or vendors claimed by BBBB to be confidential or proprietary, the confidentiality agreements embrace considerably more information than which is protectable under the UTSA. (See § 3426.1, subd. (d)(1), (2) [defining" '[t]rade secret' "].) Under the agreement terms, any prospective action by Leary and Miller involving "information concerning customers" that they learned during their employment with BBBB might be construed as a violation despite such information falling well outside the scope of a protectable trade secret under California law.
In sum, while the terms of the confidentiality agreements do not expressly prohibit competition by a former employee, their effect is to restrict the employee to pursuits that will not risk disclosure or "use [] in any way" of information concerning customers even though that information might fall within the public domain and be commonly known in the industry. As in Dowell, the confidentiality provision is neither "narrowly tailored or carefully limited to the protection of trade secrets." (Dowell, supra, 179 Cal.App.4th at p. 577.)
We conclude that insofar as the agreements signed by Miller and Leary do not merely prohibit the tortious and unlawful disclosure or use of trade secret information as statutorily defined but extend to any use of information concerning customers and vendors, they restrain their ability to engage in their profession as bail agents. The trial court therefore did not err in deeming the confidentiality agreements void as an invalid restraint on the ability of Leary and Miller to practice their profession. (Edwards, supra, 44 Cal.4th at p. 948; Dowell, supra, 179 Cal.App.4th at p. 577.) Summary adjudication of the breach of contract claim on that ground was proper.
B. Nonsuit
The trial court granted defendants' motion for nonsuit (motion) as to BBBB's remaining causes of action after finding BBBB's evidence at trial insufficient to support a verdict in its favor. BBBB contends that the court erred by failing to apply the proper legal standards to the motion and by usurping the jury's role in weighing the evidence to determine whether the information obtained by Leary and Miller constituted a trade secret.
1. Trade Secret Misappropriation Claim
"Under the UTSA, a prima facie claim for misappropriation of trade secrets requires the plaintiff to demonstrate: (1) the plaintiff owned a trade secret, (2) the defendant acquired, disclosed, or used the plaintiff's trade secret through improper means, and (3) the defendant's actions damaged the plaintiff." (Sargent Fletcher, Inc. v. Able Corp. (2003) 110 Cal.App.4th 1658, 1665.) This appeal involves only the first element-BBBB's ownership of a protectable trade secret.
a. Additional Background
Defendants' motion addressed both UTSA preemption and the merits of BBBB's trade secret claim. Defendants asserted that BBBB's trade secret claim fails because BBBB has not established the existence of a trade secret-either based on the attorney list or on Leary's past work performance that he disclosed to Sean Cook while negotiating for a position with Premiere. Defendants challenged the sufficiency of BBBB's evidence to prove that defendants took or used the alleged trade secret, and that Leary and/or Miller owed a fiduciary duty to BBBB. Defendants also argued that the UTSA preempts the other causes of action against them.
In opposition, BBBB asserted that defendants had waived their preemption argument by failing to assert it as an affirmative defense, that there was no legal basis for preemption of BBBB's claims, and that BBBB had presented substantial evidence to support a jury finding of trade secret misappropriation and of breach of fiduciary duty as to Miller and Leary.
BBBB pointed to three main sources of support for its argument that substantial evidence at trial supported its trade secret claim. First, it asserted it had identified the trade secret with sufficient particularity, "including BBBB's 'nonpublic, confidential and proprietary compilation of information developed over a period of years, of names, addresses, records, and other contact information of referring attorneys who refer clients to [BBBB] and conduct business with [BBBB], together with details about the amount and types of business generated by referring attorneys, their business preferences, and the promotional efforts and expenditures involved in maintaining relationships with referring attorneys.'" Second, it argued that case law recognizes that lists such as that identified by BBBB meet the criteria for a trade secret. Third, it asserted that it made a prima facie showing at trial that the attorney list represented two decades of efforts by BBBB- including during Leary's 13 years of employment-to cultivate relationships for the benefit of BBBB with attorneys who had referred bail or were likely to do so in the future, and was highly guarded and accessible only to a handful of employees. BBBB also maintained it had submitted substantial evidence based on its computer forensic analysis to support the misappropriation element of its trade secret claim.
In reply, defendants reiterated based on the standard for nonsuit that BBBB had not produced evidence at trial of a protectable trade secret. They asserted that BBBB had relied largely on "inaccurate or entirely misrepresentative" information about its alleged trade secret that was not borne out by the evidence.
At a hearing on the motion outside the presence of the jury, the trial court acknowledged the parties' written arguments and directed the discussion to the issue of whether protectable trade secret information had been taken from BBBB by either of the defendants. The court stated that it believed BBBB's evidence was sufficient under the standard for nonsuit to support an inference that the attorney list was taken, and there was no dispute that Leary had sent Cook his job performance statistics. Thus, the key question identified by the court was whether the material taken was a protectable trade secret.
Counsel for BBBB asserted that the trade secret was, "in effect, the list plus," meaning "the list plus the knowledge that Ryan Leary and Ashley Pilling-Miller have that makes that list valuable to Premiere" and gives Premiere "a competitive head start." Counsel for defendants maintained that employees can "take knowledge with [them]."
After considering the arguments of both sides, the trial court disagreed with defendants that a list of names and addresses alone could not be a trade secret, noting that if such a list conferred valuable information-such as specifying the top 20 attorneys who had referred the most revenue to BBBB in the last five years-it could be protectable as a trade secret. Nevertheless, the court found the list in this case did not meet those criteria, because "[a] person with [the attorney] list in their hand would be no better off than a person with a bar directory in their hand if they were looking for a way to target Bad Boys' customers." The court explained that the knowledge held by Leary "is not affected, added to or changed in any way by the [attorney] list," nor was there any evidence presented that Leary misused the knowledge he held (i.e., by soliciting BBBB's customers before leaving). Thus, the court found that because the identified trade secret (the attorney list) was not protected, the supplemental knowledge held by Leary and Miller did not render the material taken a protectable trade secret.
The trial court also considered "other facts" presented by BBBB, including "whether the list contains any other confidential information." It found that BBBB had presented no documentary evidence of such additional information, such as amounts of referred bonds, attorney personal preferences, or marketing perks utilized, nor did the list distinguish between attorneys who had referred clients to BBBB and those who had not. The court also noted that it had considered Stanley's testimony that BBBB spent " 'millions'" marketing to individuals on the attorney list but found there was no evidence of the amount spent to create the list, nor of marketing based on the list (apart from some mailings), and the list at the time that Miller downloaded it had not been updated in over six months.
The trial court concluded the evidence presented was not sufficient for a reasonable juror to find the attorney list at issue to be a protectable trade secret. The court similarly found that the information Leary reported to Cook was not protectable trade secret information because it reflected only Leary's collected amounts and did not provide BBBB's total revenues or more targeted information, such as bond amounts by attorney, bonds paid in full, or whether unpaid premium amounts were collected. Regarding the remaining causes of action, the court found that defendants had not waived their preemption argument by failing to plead it as an affirmative defense. It further decided that the common law and statutory claims were based on the same nucleus of facts as BBBB's trade secret misappropriation claim and that none of those causes of action survived "given the absence of a protectable trade secret."
b. Legal Principles and Standard of Review
A motion for nonsuit is a procedural device that allows the defendant to challenge the sufficiency of the plaintiff's evidence to submit the case to the jury. (Campbell v. General Motors Corp. (1982) 32 Cal.3d 112, 117 (Campbell).) In determining whether the plaintiff's evidence is sufficient, the court accepts the evidence most favorable to the plaintiff as true, indulging every legitimate inference which may be drawn from the evidence in the plaintiff's favor, and disregards conflicting evidence. (Nally, supra, 47 Cal.3d at p. 291.) "A mere 'scintilla of evidence' does not create a conflict for the jury's resolution; 'there must be substantial evidence to create the necessary conflict.'" (Ibid.)
We review the grant of a nonsuit motion de novo. (Holistic Supplements, L.L.C. v. Stark (2021) 61 Cal.App.5th 530, 541; accord Applied Medical Distribution Corp. v. Jarrells (2024) 100 Cal.App.5th 556, 593.) In so doing, we review the evidence in the light most favorable to BBBB as the nonmoving party, resolve all conflicts and inferences in its favor, and independently decide whether substantial evidence supports each element of BBBB's claims. (Nally, supra, 47 Cal.3d at p. 291; Fillpoint, LLC v. Maas (2012) 208 Cal.App.4th 1170, 1177.)" 'If there is substantial evidence to support [appellant's] claim, and if the state of the law also supports that claim, we must reverse the judgment.'" (Legendary Investors Group No. 1, LLC v. Niemann (2014) 224 Cal.App.4th 1407, 1412.)
c. Trade Secret Analysis
BBBB challenges the grant of nonsuit on three primary grounds. It contends that (1) whether a trade secret exists is a question of fact for the jury to decide; (2) the attorney list qualifies as a trade secret under well-settled case authority deeming customer lists and related proprietary information to be trade secrets; and (3) BBBB's evidence was sufficient, when viewed in the light most favorable to it, to make the required prima facie showing for the trade secret issue to go to the jury.
Defendants counter that the trial court correctly applied the facts to the law and found that while a customer list can potentially qualify as a trade secret, the attorney list in this case fails to meet that standard. Defendants assert that the attorney list contains no secret or valuable information. They maintain that BBBB's repeated references to other databases and unspecified information not included in the attorney list further reflects that the list has no independent economic value on its own.
Our resolution of this issue turns on whether, resolving all conflicts and drawing all legitimate inferences from the evidence in BBBB's favor, BBBB has made a sufficient showing that its attorney list plus the related knowledge of Leary and Miller constitutes a trade secret as defined by the UTSA. (§ 3426.1, subd. (d).) Whether information constitutes a trade secret is generally treated as a factual issue. (Global Protein Products, Inc. v. Le (2019) 42 Cal.App.5th 352, 367; In re Providian Credit Card Cases (2002) 96 Cal.App.4th 292, 300.) Its determination depends on related factual determinations regarding whether the information "[d]erives independent economic value" (§ 3426.1, subd. (d)(1)) and is the subject of reasonable efforts to maintain its secrecy (id., subd. (d)(2)). (Providian, at p. 300.)
Even treated as a factual issue, we disagree with BBBB that whether the attorney list and related knowledge constituted a trade secret must be decided by a jury. A defendant moves for nonsuit to test the sufficiency of the plaintiff's evidence before proceeding with the defense case. (Carson v. Facilities Development Co. (1984) 36 Cal.3d 830, 838 (Carson).) So long as it makes that determination by applying the correct legal standard, without weighing the evidence or considering the credibility of witnesses, it is proper for the trial court to ascertain whether the plaintiff presented sufficient evidence to support a favorable verdict. (See Campbell, supra, 32 Cal.3d at p. 118; Nally, supra, 47 Cal.3d at p. 291.)
A judgment of nonsuit "must not be reversed if [the] plaintiff's proof raises nothing more than speculation, suspicion, or conjecture." (Carson, supra, 36 Cal.3d at p. 839.) However, "reversal is warranted if there is 'some substance to [the] plaintiff's evidence upon which reasonable minds could differ.'" (Ibid.) Thus, it is not the nature of the question before the jury (i.e., requiring the resolution of disputed facts) that determines whether nonsuit was proper, but rather the application of proper legal standards to the evidence presented.
BBBB's reliance on Thompson v. Impaxx, Inc. (2003) 113 Cal.App.4th 1425 (Thompson) as support for its contention that the trial court erred in resolving the trade secret issue on a nonsuit motion is misplaced. Thompson involved a motion for judgment on the pleadings in a wrongful termination case. (Id. at p. 1427.) Unlike a nonsuit motion, which requires the court to interpret the evidence most favorably to the plaintiff's case and decide whether judgment for the defendant is nevertheless required as a matter of law (Nally, supra, 47 Cal.3d at p. 291), a motion for judgment on the pleadings requires the court to assume the truth of all properly pleaded material facts and decide on that basis whether the complaint states a cause of action. (Thompson, at p. 1427.)
In Thompson, the plaintiff alleged that his former employer fired him in violation of public policy for refusing to sign an unenforceable covenant not to compete. (Thompson, supra, 113 Cal.App.4th at p. 1427.) The employer asserted that the covenant was lawful and its enforcement necessary to protect the company's trade secrets, but the complaint alleged that the employer's purported trade secrets subject to the covenant were not confidential and were available on the employer's Web site. (Id. at pp. 14281429.) The appellate court explained that while the employer might eventually establish that the covenant enforced the protection of trade secrets, the court had to accept the plaintiff's allegations for purposes of the motion for judgment on the pleadings, leaving the question of trade secret information "yet [to be] proved or disproved." (Id. at p. 1430.) The court thus reversed the judgment on the pleadings, allowing the wrongful termination claim to go forward. (Id. at p. 1432.)
Here, we have the opposite circumstance. The issue is not the sufficiency of BBBB's pleading and whether disputed facts remain to be proved or disproved (Thompson, supra, 113 Cal.App.4th at p. 1430) but the sufficiency of BBBB's evidence (viewed in the light most favorable to BBBB) in support of its contention that it had a protectable trade secret. Whether the trial court correctly applied the principles governing nonsuit-not the factual nature of the inquiry-is the dispositive issue.
BBBB asserts that its attorney list qualifies as a trade secret because of the type of information at issue, its economic value, BBBB's efforts to maintain that information secret, and the unexplained business surge enjoyed by Premiere. It emphasizes that customer lists and related proprietary information have long been found to constitute trade secrets due to the economic value embedded in those lists, where a company has expended considerable time, effort, and money to compile the list, has maintained that list for a specific marketing purpose, and has taken measures to protect its secrecy. BBBB compares its creation and use of the attorney list in this case to those lists that constituted trade secrets in cases like Morlife, Inc. v. Perry (1997) 56 Cal.App.4th 1514 (Morlife), Courtesy Temporary Service, Inc. v. Camacho (1990) 222 Cal.App.3d 1278 (Courtesy), Abba Rubber Co. v. Seaquist (1991) 235 Cal.App.3d 1 (Abba Rubber), and American Credit Indemnity Co. v. Sacks (1989) 213 Cal.App.3d 622 (American Credit). Defendants do not dispute that customer lists may be protected as trade secrets but contend that the list in this case fails to meet any of the applicable criteria.
The UTSA defines a" '[t]rade secret'" as "information, including a formula, pattern, compilation, program, device, method, technique, or process, that: [¶] (1) Derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and [¶] (2) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy." (§ 3426.1, subd. (d)(1), (2).) The attorney list described at trial unquestionably satisfies the meaning of "information, including a . . . compilation" since it consists of actual and potential attorney referral sources (names, firms, addresses, phone numbers) compiled by BBBB. The cases cited by BBBB illustrate how the statutory criteria may be satisfied under circumstances involving customer lists or similar information and provide several guideposts against which we compare BBBB's evidence.
The attorney list, which was marked at trial as exhibit 178 and admitted into evidence, is not included in BBBB's appellant's appendix on appeal. Our review of the evidence regarding the alleged trade secret is therefore confined to witness testimony describing the document.
Morlife involved a suit for damages and injunctive relief against two former employees of a commercial roofing maintenance and repair company who left to start their own competing company. (Morlife, supra, 56 Cal.App.4th at p. 1518.) One of the defendants took his collection of customer business cards, representing approximately 75 to 80 percent of Morlife's customer base, and used those cards and the knowledge he had accrued to solicit business for the competing company. (Ibid.) After a bench trial, the trial court found that Morlife's "customer list was 'a compilation, developed over a period of years, of names, addresses, and contact persons, containing pricing information and knowledge about particular roofs and roofing needs of customers using its services'" (id. at p. 1521) and that the" 'identity of those particular commercial buildings using such services is not generally known to the roofing industry.'" (Ibid.)
The Court of Appeal affirmed the trial court's determination that the customer list constituted a trade secret under the UTSA. (Morlife, supra, 56 Cal.App.4th at p. 1523.) It observed, "With respect to the general availability of customer information, courts are reluctant to protect customer lists to the extent they embody information which is 'readily ascertainable' through public sources, such as business directories. [Citation.] On the other hand, where the employer has expended time and effort identifying customers with particular needs or characteristics, courts will prohibit former employees from using this information to capture a share of the market. Such lists are to be distinguished from mere identities and locations of customers where anyone could easily identify the entities as potential customers. [Citations.] As a general principle, the more difficult information is to obtain, and the more time and resources expended by an employer in gathering it, the more likely a court will find such information constitutes a trade secret." (Id. at pp. 1521-1522.) The appellate court deemed the evidence, which showed that Morlife had located its customers "with great effort" and "through the expenditure of considerable time and money" in telemarketing, sales visits, advertising, membership in trade associations, referrals, and research (id. at p. 1522), along with the evidence that it took reasonable steps to protect the information from disclosure, to be "more than sufficient to merit" the trial court's findings under the UTSA. (Id. at p. 1523.)
Courtesy similarly arose from conduct by former employees of the plaintiff company, which placed temporary workers with third-party customers. Courtesy's former employees formed a competing company utilizing its customer lists and related information. (Courtesy, supra, 222 Cal.App.3d at p. 1283.) While still employed by Courtesy, the defendants solicited Courtesy's temporary workers to switch to the defendants' newly formed company and created a customer list for the new company by utilizing the customer information and contacts developed by Courtesy. (Id. at pp. 12831284.) The appellate court affirmed the trial court's trade secret finding but reversed its erroneous denial of a preliminary injunction, stating that the facts "conclusively establish that Courtesy's customer list and related information are protectable trade secrets." (Id. at p. 1287.)
The court noted that Courtesy's "compilation . . . of its list of customers was the result of lengthy and expensive efforts, including advertising, promotional campaigns, canvassing, and client entertainment." (Courtesy, supra, 222 Cal.App.3d at p. 1287.) It explained that "even if the customers' names could be found in telephone or trade directories, such public sources' "would not disclose the persons who ultimately made up the list of [Courtesy]'s customers." '" (Id. at p. 1288.) The court additionally noted that "the nature and character of the subject customer information" (ibid.), including "billing rates, key contacts, specialized requirements and mark up rates, [wa]s sophisticated information and irrefutably of commercial value and not readily ascertainable to other competitors." (Ibid.) Thus, the court concluded that the "customer list and related proprietary information satisf[ied] the first prong of the definition of 'trade secret' under section 3426.1." (Ibid.)
Abba Rubber and American Credit offer further examples of customer lists deemed to be trade secrets under the UTSA. In Abba Rubber, the appellate court reviewed the grant of a preliminary injunction restraining former employee defendants of Abba Rubber, a rubber roller manufacturer, from soliciting customers of Abba Rubber for the benefit of the defendants' new employer who operated in the same manufacturing space. (Abba Rubber, supra, 235 Cal.App.3d at p. 7.) The court rejected the defendants' contention that the identity of Abba Rubber's customers was not a trade secret and examined under what circumstances a customer list satisfies the value element set forth in section 3426.1, subdivision (d)(1). (Id. at pp. 17-18.) The court explained that "[b]y itself, knowledge of the identities of the businesses which buy from a particular provider of goods or services is of no particular value to that provider's competitors. However, that information is valuable to those competitors if it indicates to them a fact which they previously did not know: that those businesses use the goods or services which the competitors sell." (Id. at p. 19.) The evidence showed that Abba Rubber's customer list" 'represent[ed] a winnowing down from a generalized list of companies which may utilize rubber rollers or rubber molded products to a valuable and discrete listing of a more limited number of existing and potential customers.'" (Id. at p. 20). Therefore, the appellate court concluded the trial court could have properly inferred the information about consumers of rubber rollers "was not generally known" and thus valuable under the standard for evaluating a trade secret. (Id. at p. 21.)
In American Credit, the appellate court similarly concluded that the customer list of a credit insurance company (insuring businesses that sell on credit terms in order to protect them against excessive bad debts) was a trade secret because the list "allows a competitor to direct sales efforts to the elite 6.5 percent of those potential customers which already have evinced a predisposition to purchase credit insurance" as opposed to the much larger pool of businesses that could purchase credit insurance, but do not. (American Credit, supra, 213 Cal.App.3d at p. 631.)
Having examined these and similar cases, we conclude BBBB's attorney list lacks key features shared by the customer lists in Morlife, Courtesy, Abba Rubber, and American Credit. The features that gave these customer lists "independent economic value" as defined by section 3426.1, subdivision (d)(1), included (1) the identification of customers with particular needs or characteristics relevant to the business, as opposed to mere identities of potential customers generally known in the trade, (2) the expenditure of time and resources to compile the list, and (3) specialized information (i.e., billing rates, customer preferences) not publicly available or generally known.
The evidence pertaining to BBBB's attorney list, viewed in the light most favorable to BBBB, establishes that BBBB has been marketing to and cultivating relationships with criminal defense attorneys since the company opened in 1998. During that time, BBBB has expended significant resources, including time and "millions and millions" of dollars marketing to attorneys and maintaining its attorney relationships, including by sponsoring events, meals, and outings.
In 2006 or 2007, BBBB created its attorney list. The attorney list is password protected and "highly guarded." It has fields for attorney first name, last name, law firm, and mailing address and, at the time of trial, contained between 800 and 900 names for the Northern California region. BBBB would add names to the list from a variety of sources, including direct referrals (when an attorney would refer a client to BBBB for a bail bond), business cards acquired at continuing education or criminal trial lawyers' association events, or names obtained by listening to the arraignment calendar and noting the lawyers representing defendants. The attorney list thus included attorneys who had referred bonds to BBBB as well those who had not, but could, by virtue of their practice area, and did not distinguish among the two groups. It represented the attorneys with whom BBBB had "created a relationship."
Other data kept by BBBB, including the amount of money brought in by each bond issued, bonds referred by a particular attorney, and income generated on premiums, was kept in a searchable database separate from the attorney list. That data could be paired with the attorney list to provide a "road map" for BBBB's attorney marketing department to concentrate its marketing efforts. BBBB also sought to gather and maintain personal information about the attorneys on its list, including their likes, dislikes, food preferences, and family situations, in order to enable follow-up and relationship building; however, that information did not appear on the attorney list and was not kept in a specific manner. Nor did the attorney list itself or other evidence establish the percentage of names on the list that came from direct referrals.
Taken together and drawing all reasonable inferences in favor of BBBB's claims, this evidence establishes the significant investment of BBBB in its marketing program and the creation and maintenance of the attorney list. But crucially, the evidence fails to demonstrate how the attorney list derives independent economic value from not being generally known to the public or others in the bail bond industry. (See § 3426.1, subd. (d)(1).)
The customer lists in Abba Rubber and American Credit revealed a proven subset of prospective or likely customers, thus assisting the competition which otherwise would not know (without independent research and marketing efforts) which entities were predisposed to use their services. (Abba Rubber, supra, 235 Cal.App.3d at p. 21; American Credit, supra, 213 Cal.App.3d at pp. 630-631.) By contrast, the attorney list does not afford a competitor any knowledge of attorneys more likely to refer bail than the general pool of criminal defense attorneys. The attorney list does not "indicate[] to [the competition] a fact which they previously did not know" (Abba Rubber, at p. 19), because it provides no information beyond the identities of defense attorneys in the community-already ascertainable from a variety of public sources-who either (a) have referred clients for bail bonds, or (b) might in the future refer clients for bail bonds.
So, too, in Courtesy, knowledge of the entities comprising Courtesy's customer list was valuable to a competitor who would be able to shortcut any independent research and marketing efforts by learning which businesses Courtesy had already discovered to be a hiring source for temporary workers. (Courtesy, supra, 222 Cal.App.3d at p. 1283.) Furthermore, the customer information copied by the defendants in Courtesy extended beyond that available in a public directory and included specialized customer information pertaining to billing rates, key contacts, and service requirements. (Ibid.) The information taken in Morlife provided a similar value proposition-knowledge of specific contacts for commercial buildings that utilized the" 'relatively unusual roofing service'" offered by Morlife. (Morlife, supra, 56 Cal.App.4th at p. 1521.)
Whereas the identity of commercial buildings using roofing repair services in Morlife, and the identity of businesses utilizing temporary workers in Courtesy, was not information "generally known to the public or to other persons who can obtain economic value from its disclosure or use" (§ 3426.1, subd. (d)(1)), BBBB's attorney list standing alone contains no specialized information and offers no means of discerning criminal defense attorneys more likely to refer bail. In other words, neither the composition nor the contents of the attorney list is distinguishable "from mere identities and locations of customers where anyone could easily identify the entities as potential customers." (Morlife, supra, 56 Cal.App.4th at pp. 1521-1522.)
Under these circumstances, we conclude it is not enough that the attorney list" 'represent[s] a winnowing down from a generalized list'" (Abba Rubber, supra, 235 Cal.App.3d at p. 20) of potential referral sources, because there is no evidence to suggest that inclusion on the list is predictive of those attorneys more likely to make referrals. A list of criminal defense attorneys-containing no information other than their name and work address-for a geographic region who have or have not previously referred bail to BBBB is virtually indistinguishable from a list of criminal defense attorneys for that same region plucked from any another viable source. Absent additional information (i.e., the nature and pace of the attorney's practice, historic referral rates by attorney, or attorneys' personal details and preferences), the attorney list does not delineate between or prioritize prospective referral sources that would be of value to a competitor. Nor does it offer any specialized information compiled by BBBB and not commonly known about the attorneys on the list. We decide the BBBB attorney list-standing alone-is not a trade secret.
BBBB addresses this shortcoming by asserting that its trade secret is "not merely the names and addresses of the attorneys, but also the meticulously detailed information contained in the company's confidential database related to each and every attorney with whom the company had built relationships over their 20 plus years in business - all of which was known to Leary and Miller." (Underscoring omitted.) At trial, BBBB argued it was "the list plus the knowledge" held by Leary and Miller "that makes that list valuable to Premiere" and gives Premiere "a competitive head start." It reiterates on appeal that it identified its trade secret as the" 'non-public, confidential and proprietary compilation of information developed over a period of years, of names, addresses, records, and other contact information of referring attorneys who refer clients to [BBBB] and conduct business with [BBBB], together with details about the amount and types of business generated by referring attorneys, their business preferences, and the promotional efforts and expenditures involved in maintaining relationships with referring attorneys.'" (Italics added.) At oral argument in this matter, BBBB's counsel emphasized that the "plus knowledge" represents the information acquired by Leary and Miller through their attorney marketing roles and argued that case law recognizes that such knowledge has economic value as a trade secret when used to launch a former employee's competitive endeavor.
California courts recognize that "to afford protection to the employer, the information need not be in writing but may be in the employee's memory." (Greenly v. Cooper (1978) 77 Cal.App.3d 382, 392.) In Morlife, the court acknowledged that "[t]he customer information at issue is not a physical list per se, but a compilation of names, addresses, and data derived both from business cards removed from Morlife's premises, and from the memory of [former employee] Perry." (Morlife, supra, 56 Cal.App.4th at p. 1521, fn. 4.) These decisions demonstrate that where the information resides (on a physical list or in the minds of those charged with the misappropriation) is not necessarily determinative of whether it satisfies the value requirement set forth in section 3426.1, subdivision (a).
The problem for BBBB here is that it did not introduce evidence at trial to support this "plus knowledge" formulation of its trade secret. Wallace testified generally that BBBB would obtain information about the needs of the attorneys with whom it worked but BBBB "wouldn't put [that information] on the list. The list is - the list to anybody looking at it looks like a list of names with addresses." Stanley similarly testified that "[t]o an untrained eye, [the attorney list] looks like a Google search, or a Yellow Pages. But if you work intimately and you're involved and you have access to this data, it's huge." (Italics added.)
Regarding "access to this data," the evidence favorable to BBBB established that BBBB uses the Captira database to track data on every bond issued, and that BBBB employees with the necessary level of access can run reports on Captira and capture commercially valuable information such as the amounts collected on specific bonds. The evidence established that Leary and Miller had the ability run reports on "bonds posted by attorneys," though they did not have access to run other report types based on revenue (i.e., revenue by referral or other source). It is this information, combined with specialized knowledge gained from years operating BBBB's attorney marketing department, that BBBB contends gave defendants a" 'substantial business advantage.'" (Morlife, supra, 56 Cal.App.4th at p. 1522.)
However, BBBB elicited no evidence at trial that Leary and Miller ran or viewed reports from Captira on "bonds posted by attorneys" or otherwise accessed or used information from the database. Nor is there evidence that any such financial or other data was part of or accessible via the attorney list, which was maintained on a separate spreadsheet and contained fields only for first and last name, law firm, and address.
Although BBBB speculates about the extent of Leary's and Miller's knowledge, it did not present any evidence from which this court can infer that they held such specific knowledge in their minds or otherwise copied or captured that information for purposes of cross-referencing it against the attorney list. These facts plainly distinguish Leary's and Miller's alleged "specialized knowledge" from that referenced in cases relied on by BBBB. For example, in Courtesy, the employee defendant admitted preparing a customer list while still in Courtesy's employ that included "the names of all of Courtesy's major customers" as well as information about those customers gained through his employment, such as "billing rates and/or markup percentages." (Courtesy, supra, 222 Cal.App.3d at p. 1284.) By contrast, BBBB presented no evidence that Leary and Miller held or captured those details identified in BBBB's identification of trade secret, such as the amount of business generated by referring attorneys, or the attorneys' personal preferences for marketing purposes.
In short, BBBB produced no substantial evidence at trial of any specialized knowledge or attorney referral data held by Miller and Leary which might, together with the directory-like list of attorney names and addresses with whom BBBB has or seeks to have a relationship for receiving bail referrals, enable defendants" 'to solicit [new bail referrals] both more selectively and more effectively.'" (Morlife, supra, 56 Cal.App.4th at p. 1522.) To the extent BBB asserts that the trade secret consists of the attorney list plus knowledge generally gained from the attorney marketing position, it is unclear how the attorney list-consisting only of names and addresses of criminal defense attorneys equally available in a public directory-adds anything to Leary's and Miller's nonspecific accumulated knowledge. Moreover, BBBB also has not argued or attempted to show that Miller's and Leary's knowledge itself, standing alone, is trade secret information.
We therefore decide that BBBB did not meet its prima facie burden to establish the existence of a trade secret comprising the attorney list plus other unspecified data or knowledge which "[d]erives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use." (§ 3426.1, subd. (d)(1).) The trial court did not err in granting nonsuit on this ground.
Having decided there is insufficient evidence of a trade secret, we need not address BBBB's additional argument regarding what it characterizes as Premiere's "unexplained business surge." This argument assumes that Premiere's rapid revenue increase for its Northern California business shows defendants "exploited [BBBB]'s list of referring attorneys and the knowledge of who generated the most premiums" for attorney referrals. However, that assumption fails in the absence of a protectable trade secret or any evidence that Leary and/or Miller held or had otherwise captured such knowledge from BBBB. (Cf. Courtesy, supra, 222 Cal.App.3d at p. 1284 [noting that "[i]n each such instance of solicitation" based on a former customer of Courtesy, the defendant employees "admittedly utilized the confidential customer information acquired . . . while in Courtesy's employ"].) We also need not address the trial court's finding that the information Leary disclosed to Cook related to his past work performance was not a trade secret, as BBBB does not challenge that finding on appeal.
2. Remaining Causes of Action
BBBB contends that if this court reverses the order for nonsuit as to BBBB's trade secret misappropriation claim, "the remaining tort claims should also be reversed and remanded to the trial court for the jury to decide since there was no basis for dismissing them except that the trial court found no trade secret." BBBB does not otherwise challenge the trial court's ruling as to the remaining causes of action. Because we do not reverse the grant of nonsuit as to the trade secret claim, we need not address the trial court's finding that BBBB's common law and statutory claims were based on the same nucleus of facts as the trade secret claim and do not survive the nonsuit motion "given the absence of a protectable trade secret."
C. Sanctions for Spoliation of Evidence
BBBB asserts the trial court erred in denying BBBB's sanctions motion and in failing to rule on the deferred issue of an evidentiary sanction. Defendants counter that the court did not abuse its discretion in denying sanctions and maintain that the sanctions request was procedurally barred. We agree that BBBB has not shown an abuse of discretion in the denial of the sanctions motion.
1. Standard of Review
We review orders concerning discovery sanctions under the abuse of discretion standard. (Williams v. Russ (2008) 167 Cal.App.4th 1215, 1224 (Williams); Victor Valley Union High School District v. Superior Court (2023) 91 Cal.App.5th 1121, 1137 (Victor Valley).) In so doing, we view the entire record in the light most favorable to the trial court's ruling, drawing all reasonable inferences and resolving evidentiary conflicts in support of the court's ruling. (Williams, at p. 1224; Victor Valley, at p. 1137.) We will reverse the trial court's decision"' "only 'for manifest abuse exceeding the bounds of reason.'" '" (Victor Valley, at p. 1137.) "A sanctions order exceeds the bounds of reason when the trial court acted in an 'arbitrary, capricious, or whimsical' fashion." (Ibid.)
2. Analysis
"Spoliation of evidence means the destruction or significant alteration of evidence or the failure to preserve evidence for another's use in pending or future litigation. [Citation.] Such conduct is condemned because it 'can destroy fairness and justice, for it increases the risk of an erroneous decision on the merits of the underlying cause of action. Destroying evidence can also increase the costs of litigation as parties attempt to reconstruct the destroyed evidence or to develop other evidence, which may be less accessible, less persuasive, or both.' [Citation.] While there is no tort cause of action for the intentional destruction of evidence after litigation has commenced, it is a misuse of the discovery process that is subject to a broad range of punishment, including monetary, issue, evidentiary, and terminating sanctions." (Williams, supra, 167 Cal.App.4th at p. 1223, citing Code Civ. Proc., §§ 2023.010, subd. (d), 2023.030, subds. (a)-(d); Cedars-Sinai Medical Center v. Superior Court (1998) 18 Cal.4th 1, 12.)
A trial court's "broad discretion in selecting discovery sanctions" (Doppes v. Bentley Motors, Inc. (2009) 174 Cal.App.4th 967, 992) is thus predicated on a finding of "misuse of the discovery process," authorizing the court to impose the requested issue or evidence sanction. (Code Civ. Proc., §§ 2023.010, subd. (d), 2023.030, subds. (a)-(i).)" 'Among other forms of sanctions, the court may "impose an issue sanction by an order prohibiting any party engaging in the misuse of the discovery process from supporting or opposing designated claims or defenses." ([Code Civ. Proc., § 2023.030], subd. (b).) The court may also prohibit the party from introducing designated matters in evidence. (Id., subd. (c).)'" (Victor Valley, supra, 91 Cal.App.5th at p. 1139.) California courts have generally held that, "absent unusual circumstances, nonmonetary sanctions are warranted only if a party willfully fails to comply with a court order." (Aghaian v. Minassian (2021) 64 Cal.App.5th 603, 618-619 (Aghaian); see New Albertsons, Inc. v. Superior Court (2008) 168 Cal.App.4th 1403, 1423 [concluding that the civil discovery statutes limit issue, evidence, or terminating sanctions to circumstances in which "a party fails to obey a court order compelling discovery"].)
BBBB asserts, as it did in its sanctions motion, that the evidence shows Leary and Miller made substantial preparations to move to Premiere before simultaneously notifying BBBB of their resignation on June 26, 2017, that Miller used a USB drive several times in the weeks leading up to her departure, including to access and copy the attorney list, and that BBBB sent a letter the day after their departure demanding the immediate return of "any . . . files, documents, customer lists and [c]ompany data that you have in your possession." BBBB also cites Miller's verified discovery responses and deposition testimony conceding that she once had the USB drive(s) in her possession but no longer does, and Premiere's verified discovery responses and person most knowledgeable deposition testimony denying knowledge of any devices in its or Miller's possession.
BBBB points to this evidence as support for its contention that the trial court erred in finding it was not prejudiced by the alleged spoliation. It argues that under case authority, a party is responsible for the spoliation of evidence, and even if the loss or destruction of the evidence was passive, the "failure to exert even minimal effort in preserving information highly relevant to" a pending or future action constitutes spoliation.
These arguments fail to recognize or apply the appropriate standard of review. As the party moving for discovery sanctions based on alleged spoliation, BBBB had the initial burden to make a prima facie showing that defendants "in fact destroyed evidence that had a substantial probability of damaging the moving party's [BBBB's] ability to establish an essential element of [its] claim or defense." (Williams, supra, 167 Cal.App.4th at p. 1227.) BBBB selectively cites to the evidence in its favor-evidence that, if credited by the finder of fact, might support a finding of spoliation. Nevertheless, this recitation of facts is inconsistent with the applicable standard in that the trial court rejected BBBB's showing of prejudicial loss or destruction of evidence. Instead, we review the record in the light most favorable to the trial court's ruling. (Victor Valley, supra, 91 Cal.App.5th at p. 1137.) Viewed through this lens, we conclude that the record supports the trial court's findings.
We understand the court's ruling on the issue sanction request, though phrased in terms of "prejudice," as based on the determination that the requested discovery sanction was not warranted. (See Williams, supra, 167 Cal.App.4th at p. 1225, fn. 4.)
BBBB characterizes the letter it sent the day after Leary and Miller left BBBB as a letter "notifying them" (i.e., implying it notified both individuals and/or Premiere) that "they 'must immediately return . . . any other files, documents, customer lists and [c]ompany data that you have in your possession.'" This characterization fails to acknowledge that the letter was addressed only to Leary, not Miller or Premiere. There is no evidence that Miller received or was made aware of the letter demanding the return of property, at least until the filing of BBBB's lawsuit several months later. Furthermore, BBBB presented forensic evidence documenting the opening and transfer of files onto the USB drive, but Miller testified that she used USB drives in the course of her work with BBBB and did not recall connecting a USB drive or saving the attorney list to the drive in the week before her departure. She also denied taking the USB drive (or any BBBB property) with her when she left the company.
Unlike in its assessment of the nonsuit motion, the trial court was authorized to weigh the evidence concerning Miller's conduct and decide whether BBBB's inability to recover the USB drive identified in its forensic examination was prejudicial to its ability to establish its trade secret misappropriation claim. (See Williams, supra, 167 Cal.App.4th at p. 1227.) The trial court found that BBBB had other means to prove the attorney list was taken. Resolving the disputed evidence in defendants' favor concerning Miller's alleged removal of the USB drive (Victor Valley, supra, 91 Cal.App.5th at p. 1137), and considering the other evidence available to BBBB to prove the taking aspect of its trade secret claim, BBBB has not shown that the trial court" '" 'exceed[ed] the bounds of reason'" '" and abused its discretion in deciding that BBBB had not met its initial burden to obtain an issue sanction. (Ibid.)
BBBB's arguments also fail to address how its evidentiary showing at trial, after the trial court's initial denial of the requested issue sanction, satisfied the applicable law for imposition of the requested evidentiary inference. It contends that it was "greatly prejudiced by the trial court's ruling" granting the nonsuit and failing to reach the deferred request for an evidence sanction, as the USB drive "was highly likely to show that [defendants] took more information than just the printed attorney referral list and BBBB is entitled to an evidentiary inference of that, at the very least." BBBB asserts that the loss or destruction of the USB drive permanently deprived it of the ability to examine the drive's contents and thereby establish the taking of "even more data than what [BBBB] was able to uncover through forensic means."
This claim of error, based on the implied denial of an evidence sanction based on the grant of nonsuit, lacks support in the record. As of its ruling on the motion in limine, the trial court found the question of whether "other things [were] taken" to be "very speculative." Nevertheless, the court acknowledged that an evidence sanction, directing the jury to draw an evidentiary inference about the contents of the missing drive, might be appropriate if the evidence presented at trial established that a party had not preserved evidence it should have upon proper notice.
On appeal, BBBB fails to point to any substantial evidence that it made the required showing at trial to establish "[m]isuses of the discovery process" to warrant the requested evidence sanction. (Code Civ. Proc., §§ 2023.010, subd. (d), 2023.030, subd. (c).) Especially considering the necessity to construe the evidence in support of the trial court's ruling in the most favorable light, BBBB's showing that Miller used a USB drive, including to copy the attorney list, during her employment and was later unable to locate that USB drive, does not amount to sanctionable misuse of the discovery process under the statutes. (See, e.g., Manlin v. Milner (2022) 82 Cal.App.5th 1004, 1024 [rejecting claim that evidentiary sanction was impermissibly punitive where the sanctioned party "engaged in gamesmanship"]; id. at p. 1025 [and "delayed producing what was clearly in his possession and failed to make a diligent search for records he could easily have obtained"]; Aghaian, supra, 64 Cal.App.5th at p. 619 [affirming imposition of evidentiary sanctions where the trial court found defendant had given "inadequate [discovery] responses" and "made suspect excuses" for his failure to produce more documents, which he "was quickly able to arrange" after the imposition of sanctions].) Further, our determination affirming the trial court's grant of nonsuit as to BBBB's trade secret misappropriation claim eliminates any possible showing of prejudice based on the court's failure to grant BBBB's request for an evidentiary inference regarding the contents of the USB drive.
For these reasons, we conclude that BBBB has not established that the trial court abused its discretion in denying the issue sanction or in failing to reach the deferred request for an evidentiary inference based on its grant of nonsuit at trial.
D. Costs Appeal
BBBB separately appeals from the trial court's postjudgment order granting in part and denying in part BBBB's motion to tax costs (costs order). BBBB raises two issues. The first, requesting reversal of the trial court's costs order if this court reverses the underlying judgment, is not at issue given our affirmance of the judgment of nonsuit.
A postjudgment order awarding or denying costs or attorney fees is directly appealable. (LNSU #1, LLC v. Alta Del Mar Coastal Collection Community Assn. (2023) 94 Cal.App.5th 1050, 1081 (LNSU #1); see Code Civ. Proc., § 904.1, subd. (a)(2).)
The second issue contests one aspect of the costs order. BBBB contends that the trial court's failure to tax defendants' request for fees related to certain discovery motions was error, where the court had previously denied the award of those fees as a sanction during the pendency of the proceeding.
1. Motion to Tax Costs
After the trial court's entry of judgment on its grant of nonsuit, defendants filed a memorandum of costs. Defendants sought costs totaling $44,989, based on deposition costs, jury, court reporter, and expert fees, and filing and motion fees. BBBB moved to tax costs or to strike defendants' memorandum of costs.
Among the contested costs, BBBB argued that defendants were not entitled to the fees for multiple discovery motions. BBBB asserted that as to each of the discovery motions, which included "three motions to compel, two motions to deem admitted requests for admissions, two motions to quash, and two (unspecified) ex parte applications," defendants had previously requested reimbursement for the filing fees and the court had denied the request. BBBB argued that defendants should not have a second opportunity to seek recovery of those expenses previously denied by the trial court. BBBB also challenged inclusion of the "attorney service fees" associated with the motion filings, case management statements, and other pleadings. It argued these fees were not recoverable under the costs statutes.
In its costs order, the trial court taxed certain costs challenged by BBBB, including defendants' payments to BBBB's experts for their deposition time and to court reporters. However, the court did not tax the award of fees that purportedly were previously denied in connection with defendants' discovery motion filings. After subtracting the nonrecoverable $1,913 in expert fees and $8,410 in court reporter fees, the trial court ordered defendants were entitled to recover $34,666 in allowable costs.
2. Statutory Framework and Standard of Review
A party's right to recover the costs of suit is statutory. (Rozanova v. Uribe (2021) 68 Cal.App.5th 392, 399 (Rozanova).) Code of Civil Procedure section 1032, subdivision (b) "guarantees prevailing parties in civil litigation awards of the costs expended in the litigation." (Williams v. Chino Valley Independent Fire Dist. (2015) 61 Cal.4th 97, 100 (Chino Valley).) Code of Civil Procedure section 1033.5 imposes limits on the recoverable costs a prevailing party may seek, specifying under subdivision (a) items that are allowable and under subdivision (b) those that are not allowable. (Rozanova, at p. 399; see Code Civ. Proc., § 1033.5, subds. (a)-(c).) Costs not specifically permitted under subdivision (a) or foreclosed by subdivision (b) "may be allowed or denied in the court's discretion." (Code Civ. Proc., § 1033.5, subd. (c)(4).) Further, any costs awarded-whether in the court's discretion under subdivision (c) or expressly under subdivision (a)-must be "reasonably necessary to the conduct of the litigation rather than merely convenient or beneficial to its preparation" (id., subd. (c)(2)) and "reasonable in amount." (Id., subd. (c)(3); Rozanova, at p. 399.)
" 'In ruling upon a motion to tax costs, the trial court's first determination is whether the statute expressly allows the particular item and whether it appears proper on its face. "If so, the burden is on the objecting party to show [the costs] to be unnecessary or unreasonable." [Citation.] Where costs are not expressly allowed by the statute, the burden is on the party claiming the costs to show that the charges were reasonable and necessary.'" (Rozanova, supra, 68 Cal.App.5th at p. 399.)
"We review the trial court's determination on whether the statutory criteria for an award of costs or attorney fees have been met de novo, and its determination on the amount of costs or fees for abuse of discretion." (LNSU #1, supra, 94 Cal.App.5th at p. 1081, citing Mountain Air Enterprises, LLC v. Sundowner Towers, LLC (2017) 3 Cal.5th 744, 751.)" 'Whether a cost item was reasonably necessary to the litigation presents a question of fact for the trial court and its decision is reviewed for abuse of discretion.'" (Rozanova, supra, 68 Cal.App.5th at p. 399.)
3. Analysis
Under Code of Civil Procedure section 1032, subdivision (b), the prevailing parties in a civil action "are 'entitled as a matter of right' to recover their costs '[e]xcept as otherwise expressly provided by statute.'" (Chino Valley, supra, 61 Cal.4th at p. 104.) Filing and motion fees are allowable costs that may be recovered pursuant to the statute. (Code Civ. Proc., § 1033.5, subd. (a)(1).)
BBBB does not dispute that motion fees are statutorily recoverable costs. Instead, BBBB contends that because defendants previously requested and were denied what they assert were those same fees in the context of discovery motions, their inclusion in the memorandum of costs and costs order raises a "legal question" as to whether a party can "come back to the well after trial to seek the very same expense previously requested and denied by the trial court."
BBBB maintains that the availability of a costs award, where the court previously denied those costs in connection with a prior request (here, for discovery sanctions), presents a question of law that requires this court to consider "the interplay between the post-trial cost statute and the discovery sanction statutes." BBBB further maintains that the trial court's failure to tax the motion fees was error because defendants' only avenue to revisit prior court orders denying recovery of their discovery motion fees was to file a motion for reconsideration pursuant to Code of Civil Procedure section 1008.
We understand BBBB's principal contention to be that an unsuccessful request for fees sought as a sanction under the discovery statutes may not be renewed postjudgment as a cost recoverable by a prevailing party. BBBB presents this issue as a question of law. However, BBBB fails to offer any relevant legal authority in support of its position and fails to support the factual basis for its claim with citations to the record.
As a factual matter, BBBB maintains that the same motion fees listed in defendants' memorandum of costs were previously before the trial court as part of defendants' requests for sanctions related to certain discovery motions. Although BBBB states that "the trial court denied each and every one of those sanctions requests," the only record support for this assertion is BBBB's own motion to tax costs. BBBB does not include in its appendix any of the underlying requests for discovery sanctions or related orders.
BBBB asserts there is no factual dispute that defendants requested reimbursement of the fees as part of their discovery sanctions requests, and that the trial court denied each of them. However, defendants question the extent to which the requested fees are the same. They assert that "in all but two discovery motions," the sanctions requested pertained only to attorney fees, which are not coextensive with the motion fees sought in the memorandum of costs after judgment and therefore are not part of the costs award at issue. BBBB contends defendants have forfeited this argument by failing to cite the record in support of their claim that only two sanctions motions sought motion fees.
We agree that defendants' assertion lacks supporting citations to the record but note that the same flaw permeates BBBB's principal contention on appeal. As the appellant, BBBB bears the burden to show error based on the documents from the trial court that it has provided as part of the record on appeal. (Jameson v. Desta (2018) 5 Cal.5th 594, 608-609 (Jameson); see Foust v. San Jose Construction Co., Inc. (2011) 198 Cal.App.4th 181, 187 (Foust).)
Without the relevant sanctions motions and related orders, we cannot ascertain whether the fees requested in defendants' memorandum of costs are indeed the "same fees" previously sought by defendants as discovery sanctions. We therefore are unable to undertake a meaningful review of the facts underlying BBBB's claim on appeal. (Jameson, supra, 5 Cal.5th at p. 609 ["' "[I]f the record is inadequate for meaningful review, the appellant defaults and the decision of the trial court should be affirmed."' "]; accord, Foust, supra, 198 Cal.App.4th at p. 187.)
We further conclude that BBBB fails to provide legal support for its claim. Even if we were to set aside the inadequacy of the record and accept, for purposes of appeal, BBBB's assertion that the trial court previously denied the "same fees" requested by defendants in connection with discovery sanctions, it is the appellant's duty to support the contentions on appeal with argument and authority that demonstrates prejudicial error warranting reversal. (Hernandez v. First Student, Inc. (2019) 37 Cal.App.5th 270, 276277 (Hernandez); Cal. Rules of Court, rule 8.204(a)(1)(B).)
" '[T]o demonstrate error, an appellant must supply the reviewing court with some cogent argument supported by legal analysis and citation to the record.' [Citation.] . . . We may and do 'disregard conclusory arguments that are not supported by pertinent legal authority or fail to disclose the reasoning by which the appellant reached the conclusions he wants us to adopt.'" (Hernandez, supra, 37 Cal.App.5th at p. 277.) In other words, the appellant must support each claim of error with meaningful analysis and citation to legal authority. (Ewald v. Nationstar Mortgage, LLC (2017) 13 Cal.App.5th 947, 948.) Failure to do so allows the reviewing court to deem the unsupported contentions forfeited. (Ibid.; see also Keyes v. Bowen (2010) 189 Cal.App.4th 647, 655; In re Marriage of Falcone &Fyke (2008) 164 Cal.App.4th 814, 830.)
BBBB's opening brief on appeal fails to cite a single case examining the intersection of costs awards under different statutory schemes or addressing the distinct purposes of the statutes governing discovery sanctions and costs. Instead, BBBB refers generally to the language of Code of Civil Procedure section 2023.030, subdivision (a), which authorizes imposition of a monetary sanction for misuse of the discovery process, except where the court finds the sanctioned party" 'acted with substantial justification or that other circumstances make the imposition of the sanction unjust.' " BBBB contends, without citation to authority, that where the trial court has declined to award motion fees as a sanction under the discovery statutes, "it would be wholly unfair to award motion fees after judgment."
BBBB identifies the specific discovery statutes under which it asserts the trial court previously rejected defendants' motion fee requests only in its reply brief. It states that "the issue presented is whether [defendants] are statutorily entitled to motion fees under [Code of Civil Procedure s]ection 1033.5[, subdivision] (a)(1) that were previously requested and denied under the discovery statutes, [Code of Civil Procedure s]ections 2030.300[, subdivision] (d), 2031.300[, subdivision] (d) and 2033.300[, subdivision] (d)." (Boldface & italics omitted.) We disregard references raised for the first time in BBBB's reply brief, to which defendants have no opportunity to respond. (See Hawran v. Hixson (2012) 209 Cal.App.4th 256, 268.) Further, BBBB's citation to Code of Civil Procedure section "2033.300[, subdivision] (d)" does not advance its argument, as there is no subdivision (d) in that section.
BBBB cannot carry its burden on appeal with this conclusory argument. (Hernandez, supra, 37 Cal.App.5th at pp. 276-277.) While we decline to apply the forfeiture doctrine to BBBB's claim, we observe that BBBB has supplied no legal authority to conclude that a trial court's denial of motion fees as a discovery sanction pursuant to Code of Civil Procedure section 2023.030, subdivision (a), precludes a prevailing party from recovering that motion fee in the form of a costs award pursuant to Code of Civil Procedure section 1032. Furthermore, we disagree that it would be "unfair" to award motion fees as statutorily allowed costs where the court previously denied those fees as a discovery sanction.
Costs to the prevailing party in a civil action are guaranteed as a matter of right except where an express statutory exception applies. (Code Civ. Proc., § 1032, subd. (b); Chino Valley, supra, 61 Cal.4th at p. 100.) Based on the plain language of Code of Civil Procedure section 1032, subdivision (b), defendants would not be entitled to recover allowable costs as the prevailing party in the action only if the discovery sanctions statutes constituted an "express exception" to Code of Civil Procedure section 1032, subdivision (b). (See, e.g., Chino Valley, at p. 105 [examining whether Gov. Code, § 12965, subd. (b), which provides for the discretionary award of reasonable attorney fees and costs in private actions to enforce the Fair Employment and Housing Act (FEHA), "is an express exception to" Code Civ. Proc., § 1032, subd. (b) and "therefore governs costs awards in FEHA cases"].)
BBBB points to nothing in the discovery statutes constituting such an exception. Discovery sanctions are a procedural mechanism awarded during litigation and intended" 'to prevent abuse of the discovery process and correct the problem presented.'" (Parker v. Wolters Kluwer United States, Inc. (2007) 149 Cal.App.4th 285, 301.) Upon concluding that a party has engaged in sanctionable misuse of the discovery process, courts "shall impose" the authorized monetary sanction "unless it finds that the one subject to the sanction acted with substantial justification or that other circumstances make the imposition of the sanction unjust." (Code Civ. Proc., § 2023.030, subd. (a).)
BBBB contends that the reasons for withholding imposition of a discovery sanction under Code of Civil Procedure section 2023.030, subdivision (a), defeat defendants' renewed claim, in their memorandum of costs, that motion fees were "necessary" to the litigation. (See Code Civ. Proc., § 1033.5, subd. (c)(2).) We disagree. The determination not to impose an authorized monetary sanction on a party subject to discovery abuse has no bearing on whether the underlying sanctions motion (for which fees are sought postjudgment) may later be deemed "reasonably necessary to the conduct of the litigation." (Id., subd. (c)(2).) That determination is a question of fact for the trial court at the time it considers whether to tax otherwise allowable costs. (Rozanova, supra, 68 Cal.App.5th at p. 399.) By rejecting BBBB's argument to tax the motion fees, the trial court implicitly found that the requested fees satisfied the relevant statutory requirements, including that the allowable costs were "reasonably necessary to the conduct of the litigation rather than merely convenient or beneficial to its preparation." (Code Civ. Proc., § 1033.5, subd. (c)(2).) BBBB has provided no basis for this court to conclude that the trial court's finding was not supported by the record.
We are furthermore unpersuaded by BBBB's characterization of defendants' request for motion fees in their memorandum of costs as an improper attempt to seek relief from the prior denial of the fee request under the discovery sanctions statute. The costs recovery statute "is the fundamental authority for awarding costs in civil actions" (Scott Co. of California v. Blount, Inc. (1999) 20 Cal.4th 1103, 1108), while the discovery sanctions statutes authorize a court to "impose monetary and/or nonmonetary sanctions on a party . . . for 'misuse of the discovery process'" (Victor Valley, supra, 91 Cal.App.5th at p. 1139). The statutes have distinct purposes, standards, and mechanisms for enforcement. We reject the proposition that defendants' inclusion of motion fees in their costs request is tantamount to an improper motion for reconsideration. BBBB's discussion of the standards and jurisdictional limitations for seeking reconsideration of a trial court order pursuant to Code of Civil Procedure section 1008 is therefore inapt to the question on appeal.
Because BBBB has not shown reversible error as to the trial court's costs order, we will affirm the order providing for defendants to recover $34,666 in allowable costs.
III. DISPOSITION
The judgment of nonsuit, order granting summary adjudication of the cause of action for breach of contract, and costs order are affirmed. Respondents are entitled to their reasonable costs on appeal. (Cal. Rules of Court, rule 8.278(a)(1), (2).)
WE CONCUR: Greenwood, P.J., Bromberg, J.