Opinion
A149111 A151574
02-04-2020
HECNY BROKERAGE SERVICES, INC., et al., Plaintiffs and Appellants, v. MADELINE SOPKO et al., Defendants and Respondents.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Alameda County Super. Ct. No. AG10506488)
This is a consolidated appeal from a judgment entered after a jury trial and from a posttrial order partially denying a motion to tax costs.
For more than three decades, defendant Madeline Sopko worked for plaintiffs Hecny Brokerage Services, Inc. (Hecny Brokerage) and Hecny Transportation, Inc. (Hecny Transportation) (collectively, Hecny). In 2009 she and her assistant, defendant Margie Callado, left Hecny and went to work for its competitor, defendant OEC Logistics, Inc. (OEC Logistics). Contemporaneously, Sopko signed an agreement with Hecny Brokerage that contained a two-year noncompete clause.
Hecny sued for, among other things, violation of the noncompete clause. Prior to trial, the court granted Sopko's motion for summary adjudication of that claim. It determined the noncompete clause was not enforceable and should not be judicially rewritten. That ruling is challenged in this appeal.
After the complaint was amended several times, a jury trial was held. All defendants other than OEC Shipping Los Angeles, Inc. (OEC Shipping) prevailed on plaintiffs' claims. The jury determined that OEC Shipping was liable for intentional interference with prospective economic relations but found that plaintiffs were not entitled to any damages. So, judgment was entered in favor of all defendants. Plaintiffs' subsequent motion to tax costs was partially denied.
OEC Shipping Los Angeles, Inc. dba OEC Group, Inc. was added as a defendant in the first amended complaint filed in 2011. OES Global, LLC was added as a defendant in the fourth amended complaint filed in 2013.
On appeal, plaintiffs challenge: (1) the trial court's pretrial ruling that the noncompete clause was unenforceable and should not be rewritten; (2) the jury's subsequent rejection of their fraud and interference claims, which plaintiffs insist was the product of the court's erroneous pretrial breach-of-contract ruling; (3) the jury's finding that Hecny had no trade secrets; and (4) the trial court's partial denial of their motion to tax costs. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
Plaintiff Hecny Brokerage is a corporation headquartered in the United States. Its San Francisco Bay Area office provides customs brokerage services for importers, facilitating the clearance of shipped goods through United States Customs. Another Hecny corporation, plaintiff Hecny Transportation, is headquartered in Hong Kong and arranges the transportation of shipped goods from their point of origin to their final destination. Hecny Brokerage and Hecny Transportation have offices all over the world, including the Bay Area, and are owned by the Lee family of Hong Kong.
Defendant Madeline Sopko was at all relevant times a licensed customs broker. Hecny Brokerage had both a local permit allowing her to clear shipments through the Broker District of San Francisco (which included the ports of Eureka; Fresno; Reno, Nevada; and San Francisco/Oakland) and a national permit allowing her to clear shipments through any port of entry in the United States.
Sopko began working for Hecny Brokerage in 1977. Soon she acquired an 11-percent interest in Hecny Brokerage's Bay Area office in exchange for $11,000 in capital, and began managing its brokerage operations. Hecny frequently entered into joint venture arrangements with its local managers to encourage them to generate business for the company and to provide retirement income for them. The parties agree they entered into such an agreement (hereinafter, 1977 agreement).
Neither party could locate a copy of this 1977 joint venture agreement. According to Hecny, the 1977 agreement contained a two-year noncompete clause; Sopko did not recall whether it did.
Sopko enjoyed working for Hecny and earned an excellent reputation with its management, employees and customers alike. She worked with importers in Northern and Southern California (40 percent and 10 percent of her business, respectively), as well as in 17 other states (40 percent) and two foreign countries (just under 10 percent). Sopko used Hecny Brokerage's local and national permits to clear shipments at ports inside and outside California. She also handled customs brokerage transactions for individuals transporting big game trophy shipments from African countries through ports across the United States to roughly 20 states.
Between 2003 and 2007, Sopko served as the station manager for Hecny's Bay Area office, overseeing both its transportation and its brokerage divisions. In 2007, however, Sopko's work environment deteriorated significantly when Hecny hired Kunie Chang as an executive based in the Bay Area office, and tasked him with managing and restructuring Hecny's U.S. offices. Chang, who eventually became president of Hecny's U.S. operations, was widely disliked among Hecny employees due to his abrasive and abusive management style.
Sopko disliked Chang and disagreed with nearly all his business decisions, which included firing key employees and closing branch offices. Chang demoted Sopko from Bay Area station manager to brokerage manager. Chang also demoted Sopko's colleague Brad Boushey from vice-president of sales and development to salesperson. After Boushey refused to cooperate with Chang, his employment was terminated and he went to work for defendant OEC Shipping.
Defendant OEC Logistics competes with Hecny Brokerage. It too provides services to facilitate the customs entry clearance process for importers. Similarly, defendant OEC Shipping arranges the transportation of imported goods, competing with Hecny Transportation. Collectively, OEC Logistics and OEC Shipping do business as OEC Group, Inc. (OEC).
In April 2009, while still employed by Hecny, Boushey was invited to meet with representatives of OEC in Los Angeles. He asked Sopko to join them, and she agreed. At an April 28, 2009 meeting, the group discussed the possibility of OEC Logistics opening a Bay Area office. When Hecny terminated Boushey's employment on May 8, 2009, he immediately began working as an OEC salesperson. Two significant Hecny customers soon left for OEC.
In the spring and summer of 2009, Boushey was telling his customers, by e-mail, that Sopko and Callado would also be joining OEC. However, Boushey testified that he was not certain of that; he merely suspected they would do so given the current work conditions at Hecny. Callado testified that she had not then decided to join Boushey at OEC, although she later did.
On June 15, 2009, Sopko e-mailed Hecny's owner Charlie Lee in Hong Kong, stating she was "tendering [her] resignation and giving two week [sic] notice." Sopko's e-mail was prompted in part by her discovery of an Internet job posting for her position and a resulting fear that Chang was going to fire her.
Sopko explained at trial that, when she initially gave notice, she intended to retire rather than seek new employment. However, " 'personal family matters' " arose in July 2009 that caused her to rethink her retirement plans and to continue working.
When Lee received Sopko's June 15, 2009 e-mail, Hecny's management asked her not to resign until they could meet in person during Lee's annual trip from Asia to the United States. She agreed. But following an August 2009 meeting, Sopko was unmoved and told management that Chang's abusive management style had prompted her decision. She, then in her 60's, wanted to retire. On August 20, 2009, Sopko submitted her final letter of resignation, citing the work environment under Chang's management and "family obligations" as the reasons for her decision. In the letter Sopko told Lee: "I took your Company, your name, and your reputation . . . and made it something others could trust & respect. I can no longer do that with the current management here in the U.S."
In September 2009, Hecny and Sopko began discussions about the repurchase of her 11-percent interest in Hecny Brokerage's Bay Area office. After some back and forth, Sopko and Hecny Brokerage executed an October 20, 2009 agreement for the purchase and sale of a joint venture interest (hereinafter, 2009 Agreement) pursuant to which Sopko sold her interest in the joint venture back to the company in exchange for $220,000 and her "agree[ment] not to engage in the field of customs brokerage and freight forwarding for a period of two years, from the date of this agreement." Hecny Brokerage, in turn, agreed to indemnify and hold Sopko harmless against all joint venture liabilities whether incurred before or after her withdrawal or retirement date. The 2009 Agreement also recited that "Ms. Sopko intends to retire altogether from work . . . ."
On October 1, 2009, a few weeks before signing the 2009 Agreement, Sopko began working as a customs broker in OEC Logistics's new Bay Area office. When asked why she signed the 2009 Agreement with the noncompete clause, Sopko explained that, one, she was presented with the agreement by Tony Lee without prior notice of its noncompete clause and was told she must sign it in order to receive her buyout payment and, two, she was fairly certain the clause was not enforceable.
Callado, in turn, ended her employment at Hecny on October 15, 2009, and joined Sopko at OEC in November 2009. Callado indicated to Hecny she was resigning to go to the Philippines for family reasons; however, she explained at trial that she did not ultimately go on her trip because "[t]hings changed."
After Sopko's and Callado's departures, many of Hecny Brokerage's customers complained of poor and unresponsive customer service. These customers had previously benefited from Sopko's experience and skills, and Hecny had not been able to replace her with someone of comparable expertise. Numerous customers also expressed dissatisfaction with Hecny's service and pricing as compared to OEC's and, thus, moved their business to OEC. According to Hecny employee Maddie Wiens, company business fell off by as much as 75 percent after Sopko left.
OEC, in turn, decided about a year after hiring Sopko that its OEC Logistics Bay Area office would not be profitable and shut it down effective December 31, 2010. At that point, Sopko began operating independently, serving some of her same customers through a limited liability company called OES Global, LLC (OES Global).
On March 26, 2010, plaintiffs commenced this lawsuit against Sopko, Callado, and OEC Logistics, adding OEC as a defendant in their first amended complaint, and OEC Shipping and OES Global as defendants in their fourth amended complaint.
In 2012, the trial court granted Sopko's motion for summary adjudication of the breach of contract cause of action in plaintiffs' first amended complaint. In doing so, the trial court found the noncompete clause in the 2009 Agreement unenforceable as a matter of law and declined Hecny's request to restrict the clause's geographic scope to make it enforceable.
A jury trial was commenced on April 25, 2016, with respect to the causes of action in the seventh amended complaint: intentional and negligent misrepresentation and concealment against Sopko as direct tortfeasor and against Callado and OES Global as aiders and abettors; intentional interference with prospective economic relations against all defendants; trade secret misappropriation against all defendants; and breach of fiduciary duty against Sopko and against Callado, OEC Logistics and OEC Shipping as coconspirators. Plaintiffs' equitable cause of action under Business and Professions Code section 17200 against Sopko, OEC Logistics, OEC Shipping, and OES Global was not tried to the jury.
On June 3, 2016, the jury returned special verdicts for the defense as to all causes of action but one. It found in plaintiffs' favor on the cause of action for intentional interference with prospective economic relations against OEC Shipping. However, the jury also found plaintiffs were entitled to no economic damages. After the trial court rejected plaintiffs' posttrial motions for new trial and judgment notwithstanding the verdict, judgment was entered in defendants' favor as to all causes of action.
On July 6, 2016, the OEC defendants filed a memorandum of costs that included litigation costs incurred after the service of two offers to settle under Code of Civil Procedure section 998, the first made in 2014 and the second in 2015. (Plaintiffs rejected each.) On July 20, 2016, plaintiffs filed a motion to tax costs. The trial court denied that motion in part and granted it in part, awarding OEC $206,469 in costs.
Plaintiffs timely appealed both the judgment and the posttrial order partially denying their motion to tax costs.
DISCUSSION
Plaintiffs argue on appeal: (1) the trial court erred in invalidating the 2009 Agreement's noncompete clause barring Sopko from engaging in the fields of customs brokerage and freight forwarding for two years and then summarily adjudicating their breach of contract claim in defendants' favor; (2) as a result of this erroneous summary adjudication ruling, plaintiffs were effectively precluded from presenting their claims for fraud, interference, and economic damages to the jury; (3) the jury's finding that plaintiffs had no trade secrets was contrary to the evidence; and (4) the trial court erred in partially denying their posttrial motion to tax costs. We address each contention in turn below. I. The trial court properly found the noncompete clause invalid.
The trial court found the noncompete clause in the 2009 Agreement void and dismissed plaintiffs' breach of contract claim on summary adjudication. That order is now appealable under Code of Civil Procedure section 906. (Travelers Casualty & Surety Co. v. Transcontinental Ins. Co. (2004) 122 Cal.App.4th 949, 952, fn. 2; see Code Civ. Proc., § 904.1, subd. (a)(1).)
"A motion for summary adjudication shall be granted if it completely disposes of a cause of action, an affirmative defense, a claim for damages, or an issue of duty. (Code Civ. Proc., § 437c, subd. (f)(1).) We review de novo a trial court's decision to grant summary judgment or summary adjudication. (Wiener v. Southcoast Childcare Centers, Inc. (2004) 32 Cal.4th 1138, 1142 [citations].) In performing this de novo review, we view the evidence in the light most favorable to the opposing party and strictly construe the evidence of the moving party, and resolve any evidentiary doubts in favor of the opposing party. (Ibid.)" (Dowell v. Biosense Webster, Inc. (2009) 179 Cal.App.4th 564, 574, 579 [trial court properly determined on summary adjudication that noncompete and nonsolicitation clauses were facially void]; see Kolani v. Gluska (1998) 64 Cal.App.4th 402, 407-408 [trial court properly found noncompete covenant invalid as a matter of law on demurrer] (Kolani); Kelton v. Stravinski (2006) 138 Cal.App.4th 941, 946-949 [trial court properly found noncompete clause invalid as a matter of law on summary judgment].)
Noncompete agreements are void under California statutory law, subject to limited exceptions. (Edwards v. Arthur Andersen LLP (2008) 44 Cal.4th 937, 945.) Business and Professions Code section 16600 says, "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." (§ 16600.)
Unless otherwise stated, all statutory citations are to the Business and Professions Code.
" 'California courts have consistently declared [section 16600] an expression of public policy to ensure that every citizen shall retain the right to pursue any lawful employment and enterprise of their choice.' ([Citation]; see Strategix, Ltd. v. Infocrossing West, Inc. (2006) 142 Cal.App.4th 1068, 1072 ['California's public policy affirms a person's right to pursue the lawful occupation of his or her choice.'] [(Strategix)].)" (In re Marriage of Gréaux & Mermin (2014) 223 Cal.App.4th 1242, 1250 (Gréaux & Mermin).)
The exceptions to section 16600's broad prohibition "include noncompetition agreements made in connection with the sale of a business (§§ 16601, 16602.5) or the dissolution of a partnership (§ 16602)." (Gréaux & Mermin, supra, 223 Cal.App.4th at p. 1248.) Relevant here, section 16601 provides in pertinent part: "Any person who sells the goodwill of a business, or any owner of a business entity selling or otherwise disposing of all of his or her ownership interest in the business entity, . . . may agree with the buyer to refrain from carrying on a similar business within a specified geographic area in which the business so sold . . . has been carried on, so long as the buyer, or any person deriving title to the goodwill or ownership interest from the buyer, carries on a like business therein." (§ 16601, 1st par.)
Neither party disputes that goodwill was part of what was transferred under the 2009 Agreement.
Similarly, section 16602 provides: "Any partner may, upon or in anticipation of [a dissolution of the partnership or dissociation of the partner from the partnership], agree that he or she will not carry on a similar business within a specified geographic area where the partnership business has been transacted, so long as any other member of the partnership, or any person deriving title to the business or its goodwill from any such other member of the partnership, carries on a like business therein." (§ 16602, subd. (a).) Plaintiffs contend and defendants do not dispute that from a legal standpoint a partnership and a joint venture " 'are virtually the same.' (Weiner v. Fleischman (1991) 54 Cal.3d 476, 482.)"
"[I]n order to uphold a covenant not to compete pursuant to section 16601 [or section 16602], the contract for sale of the corporate shares may not circumvent California's deeply rooted public policy favoring open competition. The transaction must clearly establish that it falls within this limited exception." (Hill Medical Corp. v. Wycoff (2001) 86 Cal.App.4th 895, 903, italics added.) Moreover, the covenant will be enforced only "to the extent that it is reasonable and necessary in terms of time, activity and territory to protect the buyer's interest." (Monogram Industries, Inc. v. Sar Industries, Inc. (1976) 64 Cal.App.3d 692, 698 (Monogram); see Gréaux & Mermin, supra, 223 Cal.App.4th at pp. 1254-1255; Strategix, supra, 142 Cal.App.4th at p. 1073.)
Here, the trial court identified at least two fundamental problems with the noncompete clause in the 2009 Agreement. First, the clause contains no geographic limitation. Second, the clause bans Sopko from engaging in the fields of both customs brokerage and freight forwarding even though Hecny Brokerage (the only Hecny entity party to the 2009 Agreement) engaged only in customs brokerage, not freight forwarding.
Thus, the noncompete clause was not limited to "carrying on a similar business within a specified geographic area in which the business so sold . . . has been carried on" (§ 16601, 1st par.) or to "carry[ing] on a similar business within a specified geographic area where the partnership business has been transacted" (§ 16602, subd. (a)). It banned Sopko from working anywhere with anyone. Sopko could not do business in Brisbane (where Hecny's office was located), and neither could she do business anywhere else in the world. Similarly, Sopko could not work as a customs broker, and neither could she solicit work as a freight forwarder. Sopko could not solicit Hecny's customers, and neither could she solicit any other customer in the world. All of that is fatally overbroad. The trial court was correct in determining the noncompete clause was void. II. The trial court was not required by law to rewrite the noncompete clause.
Plaintiffs do not really dispute that the noncompete clause is invalid as written. Instead, they argue the trial court should have rewritten the clause. Plaintiffs insist the "fundamental problem in this case is that the trial court strained to defeat, not save, the covenant."
Plaintiffs say the trial court should have rewritten the clause in two ways. One, it should have read into the clause a geographical restriction encompassing "the maximum territory allowed by statute," which plaintiffs describe in nonspecific terms as the territory in which the business " 'has been carried on' or 'has been transacted.' (Bus. & Prof. Code, §§ 16601, 16602, subd. (a).)" Two, the court should have read out of the clause the prohibition on Sopko engaging in freight forwarding, since she only engaged in customs brokerage on behalf of Hecny Brokerage. Plaintiffs cite Civil Code section 1643, providing that a "contract must receive such an interpretation as will make it lawful, operative, definite, reasonable, and capable of being carried into effect, if it can be done without violating the intention of the parties." (See also Civ. Code, § 1599.)
A. The Statutory Framework.
Plaintiffs cite many cases, some as old as 1894. However, the statutes which control this line of cases have changed significantly over the years. These cases cannot be properly understood without putting them in their statutory context.
Prior to 1872 the common law permitted "reasonable" restraints on competition to be imposed incident to the sale of the goodwill of a business. (Vulcan Powder Co. v. Powder Co. (1892) 96 Cal. 510, 513.) In 1872 the Legislature limited those restraints to " 'a specified county, city, or part thereof . . . .' " (Id. at p. 510, quoting former Civ. Code, § 1674.) In 1941 the Legislature repealed former Civil Code section 1674, added Business and Professions Code sections 16600-16602 (Stats. 1941, ch. 526, § 1, p. 1834), and broadened the limit (now in Business and Professions Code section 16601) to "a specified county or counties, city or cities, or a part thereof, in which the business so sold has been carried on . . . ." (Stats. 1941, ch. 845, § 1, p. 2427.) In 2002 the Legislature amended Business and Professions Code section 16601 to broaden the language further to " 'a specified geographic area in which the business so sold . . . has been carried on . . . .' " (Alliant Ins. Services, Inc. v. Gaddy (2008) 159 Cal.App.4th 1292, 1301, fn. 9, italics omitted.)
With respect to the dissolution of a partnership, the law underwent similar changes. In the 1872 Civil Code, former section 1675 permitted partners to " 'agree that none of them will carry on a similar business within the same city or town where the partnership business has been transacted, or within a specified part thereof.' " (Howard v. Babcock (1993) 6 Cal.4th 409, 417.) In 1961 that was broadened to read "within a specified county or counties, city or cities, or a part thereof . . . ." (Stats. 1961, ch. 1091, § 1, pp. 2820-2821.) The 2002 amendment expanded Business and Professions Code section 16602's language to "a specified geographic area where the partnership business has been transacted . . . ." (Stats. 2002, ch. 179, § 2, p. 827.)
So, over time, the permitted restraint changed from "reasonable" to "a specified county or city or a part thereof," to "a specified county or counties, city or cities, or a part thereof," to "a specified geographic area in which the business has been carried on" or "transacted." The original limitation to "reasonable" restraints was "uncertain and led to much perplexing legislation." (Vulcan Powder Co. v. Powder Co., supra, 96 Cal. at p. 513.) In 1872 the rule became more definite and easier to apply, likely reflecting the local nature of business enterprise. However, in 1941, 1961 and 2002, again, likely reflecting changing economic reality, the standard was broadened, making application more problematic in many cases.
B. Principles of Contract Interpretation.
As noted, "[a] contract must receive such an interpretation as will make it lawful, operative, definite, reasonable, and capable of being carried into effect, if it can be done without violating the intention of the parties." (Civ. Code, § 1643.) "Where a contract has several distinct objects, of which one at least is lawful, and one at least is unlawful, in whole or in part, the contract is void as to the latter and valid as to the rest." (Civ. Code, § 1599.)
Courts will generally reform contracts only where the parties have made a mistake and not merely to save an illegal contract. (Hess v. Ford Motor Co. (2002) 27 Cal.4th 516, 524; see 1 Witkin, Summary of Cal. Law (9th ed. 1987) Contracts, §§ 382, 386, pp. 347-348, 350-351.) "In reforming [a] written agreement, a court may 'transpose[], reject[], or suppl[y]' words [citation], but has ' "no power to make new contracts for the parties" ' ([citation], quoting 22 Cal.Jur. (1925) Reformation of Instruments, § 2, p. 710). Rather, the court may only reform the writing to conform with the mutual understanding of the parties at the time they entered into it, if such an understanding exists." (Hess v. Ford Motor Co., supra, at p. 524.) Where a court is unable to cure a contract's defects through severance or restriction and is not permitted to cure it through reformation and augmentation, "it must void the entire agreement." (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 124-125.) As explained in Armendariz: " 'No existing rule of contract law permits a party to resuscitate a legally defective contract merely by offering to change it.' " (Id. at p. 125.) Nor is there an existing rule of contract law that requires a court to resuscitate a legally defective contract merely because one party offers to change it. (See, e.g., Strategix, supra, 142 Cal.App.4th at pp. 1073-1074; Kolani, supra, 64 Cal.App.4th at pp. 407-408.)
C. Applying These Principles to This Case.
On summary adjudication, plaintiffs argued the trial court should rewrite the noncompete clause in an enforceable form. However, plaintiffs were unable to articulate a clear reformulation that would meet Civil Code section 1643's requirement that it be "definite, reasonable, and capable of being carried into effect . . . without violating the intention of the parties."
When Hecny moved for summary adjudication in 2011, it suggested three different formulations for a new noncompete clause: (1) "all counties where [Hecny Brokerage's] customers were located, as well as the county where the Brisbane office of HBS was located"; (2) "the entire Northern California" [sic]; and (3) "the whole State of California." At the hearing on Sopko's motion for summary adjudication a few months later, Hecny suggested the trial court could impose a geographical limit that includes the entire United States. All of Hecny's reformulations were either overbroad or underinclusive or both. None limited the restriction to "a specified geographic area in which the business . . . has been carried on" (§ 16601, 1st par.) or "transacted" (§ 16602, subd. (a)).
Unable to articulate a clear geographical limitation based on the undisputed material facts relating to Sopko's professional territory, plaintiffs were, perforce, unable to show how such a limitation comported with the parties' objective intentions when they negotiated and executed the 2009 Agreement.
D. Hecny's Authorities.
Still, Hecny says, the court had an obligation to "strain to put such a construction upon the covenant so as to save it in part." (Italics omitted.) In making this argument, Hecny cites eight cases in which it says courts rewrote and enforced void noncompete clauses. But all predate the 2002 amendments to sections 16601 and 16602. They involved much simpler facts which permitted the relevant clause to be rewritten (or enforced) in a precise manner consistent with both applicable statutory limits and the parties' objective intentions as informed by the practical realities of the business interest they were transferring.
Five of the cases were decided under former Civil Code section 1674's one-city-or county rule. It was a simple matter to limit the noncompete clause to a relevant geographic area. (City Carpet etc. Works v. Jones (1894) 102 Cal. 506; Stephens v. Bean (1924) 65 Cal.App. 779; General Paint Corp. v. Seymour (1932) 124 Cal.App. 611; Edwards v. Mullin (1934) 220 Cal. 379; Mahlstedt v. Fugit (1947) 79 Cal.App.2d 562.) Two of the cases were decided under former section 16601's or former section 16602's "county-or-counties-or-city-or-cities" rule. Again, it was a relatively simple task to define the relevant geographic area. (Kaplan v. Nalpak Corp. (1958) 158 Cal.App.2d 197; Swenson v. File (1970) 3 Cal.3d 389.) The eighth case was also decided under the 1963 version of former section 16601. But there, the court did not have to rewrite the noncompete clause. It simply enforced the parties' agreement. (Monogram, supra, 64 Cal.App.3d 692.)
The injunction in Monogram was broader than permitted in former section 16601, running (as written in the contract) to the United States—including the Commonwealth of Puerto Rico and the Virgin Islands of the United States—and Canada. In 1990, Fleming v. Ray-Suzuki, Inc. (1990) 225 Cal.App.3d 574 relied on Monogram to hold that parties could agree to refrain from competing in counties and cities outside California. "We think the language of Business and Professions Code section 16601 . . . cannot rationally be limited to California." (Id. at p. 583.) The Legislature was aware of this when it amended former section 16601 in 2002 to remove the cities-and-counties restriction. (Sen. Com. on Judiciary, Analysis of Assem. Bill No. 601 (2001-2002 Reg. Sess.) as amended June 3, 2002, pp. 5-7.)
Of course, Sopko's endeavors were not restricted to a well-defined locality as were those of a carpet cleaner (City Carpet etc. Works v. Jones, supra, 102 Cal. 506), an undertaker (Stephens v. Bean, supra, 65 Cal.App. 779) or a manufacturer of heavy equipment (Mahlstedt v. Fugit, supra, 79 Cal.App.2d 562). She was working in a 21st-century global environment with importers in Northern California, Southern California, 17 other states, and two foreign countries, clearing shipments at ports inside and outside California as well as hunting trophies to about 20 states through ports around the country. This was a geographical area that escaped the relatively easy definition of the cases on which Hecny relies. Only Monogram involved work that approached the complexity of Sopko's brokerage business. And there, the parties negotiated a defined scope for their noncompete clause which the court could simply enforce. No rewriting was required.
We also note that each of these cases in which there was judgment for plaintiffs sought injunctive or declaratory relief. The court determined the appropriate scope of the restriction and ordered that, thereafter, defendants must limit their activities to that scope. In none of those cases did a court retrospectively define the limits of the restriction and award damages based on a retroactive definition. (The only cases in which that appears to have been possible—on remand—were General Paint Corp. v. Seymour, supra, 124 Cal.App. 611, and Edwards v. Mullin, supra, 220 Cal. 379. But those were simpler fact patterns and presented none of the difficulties posed by this case with respect to defining a proper limit on competition.) Here, plaintiffs did not seek injunctive or declaratory relief. Instead, they sought damages against a party whose only covenant not to compete was void unless and until rewritten by the court.
E. Strategix.
The trial court relied upon a more modern case: Strategix, supra, 142 Cal.App.4th 1068. There, Strategix, Ltd. and its parent, ePassage, Inc., sold to Systems Management Specialists (SMS) (the predecessor of Infocrossing West, Inc.) the goodwill and substantially all the assets of Strategix, Ltd. (Id. at pp. 1070-1071.) The asset purchase agreement and a contemporaneous consulting services agreement prohibited ePassage from soliciting SMS's customers and employees. (Id. at p. 1071.)
The trial court enforced those covenants. (Strategix, supra, 142 Cal.App.4th at pp. 1070-1071.) Reversing on appeal, the Strategix court held the nonsolicitation covenants were unenforceable "because they are broader than permitted by the statute that authorizes noncompetition covenants reached in connection with the sale of a business, . . . section 16601." (Id. at pp. 1071, 1075.)
Plaintiffs attempt to distinguish Strategix on the ground that, unlike here, the contracting parties had agreed the seller of the business would be barred from soliciting all the buyer's employees and customers and not just the seller's, thereby extending beyond the statutory protection of "the business so sold . . . ." (See § 16601, 1st par.) While plaintiffs correctly describe Strategix's holding, they miss the point. In our case, just like in Strategix, the noncompete clause created a restraint extending beyond the statutory protection of "the business . . . sold . . . ."
The Strategix plaintiffs urged the reviewing court to " 'blue pencil[]' " the illegal noncompete clause, just as Hecny urges here. But the Strategix court refused, explaining: "[C]ourts will not strike a new bargain for the parties 'for the purpose of saving an illegal contract.' (Kolani[, supra,] 64 Cal.App.4th [at p.] 407 [citation] . . . .) In Kolani, the court declined to 'rewrite the broad covenant not to compete into a narrow bar on theft of confidential information.' (Id. at p. 408.) We decline to rewrite overbroad covenants not to solicit Infocrossing's employees and customers into narrow bars against soliciting Strategix's former employees and customers. Had the parties intended to reach such limited—and enforceable—covenants, they could have negotiated for them. We will not do so for the parties now. [Fn. omitted.]" (Strategix, supra, 142 Cal.App.4th at p. 1074.)
Here too, had the parties intended to reach a lawful noncompete clause with an appropriate geographical limit, they could have negotiated the difficult issue of defining where Sopko and Hecny Brokerage carried on business. But they did not do so.
The Strategix court could have " 'blue penciled' " the covenant at issue by simply replacing "Infocrossing's employees and customers" with "Strategix's former employees and customers." (Strategix, supra, 142 Cal.App.4th at p. 1074.) This case is a fortiori.
Here, there is no such simple fix. Given the undisputed facts before the trial court, there was no clear definition of "a specified geographic area where the partnership business has been transacted" (§ 16602, subd. (a)) or where Hecny's brokerage "business . . . has been carried on" (§ 16601, 1st par.). Hecny relies on cases in which courts could easily limit a noncompete clause to that which was statutorily permissible, consistent with the parties' bargain, and fair. But it proposed no such simple redraft of the noncompete clause. Rather, it suggested the court should draft an unspecified clause that the parties never negotiated in a context in which there is no single, obvious way to define a legitimate restriction.
Strategix refused to draft what the parties did not negotiate. We agree. The trial court appropriately declined to rewrite the parties' agreement. III. The jury verdicts on the claims for fraud and interference with prospective economic relations stand.
Plaintiffs' second argument is predicated on their first—the trial court's erroneous summary adjudication ruling effectively precluded them from presenting their fraud and interference claims to the jury; a new trial is necessary so the jury can be "correctly informed" the noncompete clause is enforceable.
We have already concluded the trial court properly found the noncompete clause unenforceable. Thus, plaintiffs' dependent argument necessarily fails. IV. No basis exists for disturbing the jury's finding of no trade secrets.
Plaintiffs challenge the jury's unanimous finding that Hecny had no trade secrets. They say it is "factual error, plain and simple."
In California, claims for misappropriation of trade secrets are governed by statute. Information, including a "formula, pattern, compilation, program, device, method, technique, or process," constitutes a trade secret under Civil Code section 3426.1 if the information: (1) derives independent economic value 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 "reasonable under the circumstances to maintain its secrecy." (Civ. Code, § 3426.1, subd. (d).)
Whether an employer's customer information constitutes a trade secret within the meaning of Civil Code section 3426.1, subdivision (d) is a question of fact reserved for the jury. (Thompson v. Impaxx, Inc. (2003) 113 Cal.App.4th 1425, 1430.) We will reverse the jury's finding on appeal only if it is not supported by substantial evidence. (Morlife, Inc. v. Perry (1997) 56 Cal.App.4th 1514, 1519.)
We will not "examine the record to determine whether the trier of fact could have reached a conclusion other than the one reached." (Morlife, Inc. v. Perry, supra, 56 Cal.App.4th at p. 1519.) Rather, " '[a]n appellate court " 'must presume that the record contains evidence to support every finding of fact . . . ." ' [Citations.] It is the appellant's burden . . . to identify and establish deficiencies in the evidence. [Citation.] This burden is a "daunting" one.' [Citation.]" (Holguin v. DISH Network LLC (2014) 229 Cal.App.4th 1310, 1326.) Having reviewed the record at hand, we conclude this standard has not been met.
Plaintiffs contend that around the time Sopko and Callado left Hecny for OEC, certain company files disappeared. They contained allegedly confidential customer information, including "notes, cheat sheets, classifications, handling procedures, and contact information," as well as "harmonized tariff codes." Plaintiffs describe the steps they took to protect this information and contend the material was properly characterized as "trade secrets." The jury disagreed. It found none of that material was a trade secret.
Defendants cite evidence that the alleged trade secrets were either publicly available and, thus, lacked independent economic value from not being generally known (Civ. Code, § 3426.1, subd. (d)(1)) or were not subject to reasonable efforts by Hecny to maintain their confidentiality (id., subd. (d)(2).)
For example, defendants point to testimony from OEC executives regarding the company's use of Datamyne, an online subscription service. Through this service OEC employees could look up an array of information regarding each of Hecny's business transactions, including the ocean customer's name and contact information and details regarding each shipment's particular product, volume, seller, and shipper. This information was used to identify and then target potential customers, including those of its competitors (like Hecny).
Hecny claimed that "harmonized tariff codes" were its trade secrets. But an OEC executive testified that nearly all information necessary to handle the customs entry of a shipment for a given customer could be found online and used to determine the product's harmonized tariff code classification. This information could be found in public sources, including importer or exporter catalogues, customer Web sites, the U.S. Customs online database or, in many instances, on customer invoices. Given these sources, the information was "generally known to the public or to other persons" (Civ. Code, § 3426.1, subd. (d)(1)).
Defendants also note that Boushey left the company for OEC before Sopko and took with him the laptop containing his customer lists and other business information. Hecny never asked him to return or dispose of this information. Since Boushey was not subject to a noncompete agreement, he immediately began using it to contact his former Hecny customers and solicit their business on behalf of OEC. In fact, two significant Hecny customers left Hecny for OEC after Boushey—but before Sopko—joined the company. The jury could consider this in finding that plaintiffs did not make "efforts that are reasonable under the circumstances to maintain . . . secrecy." (Civ. Code, § 3426.1, subd. (d)(2).)
There was still more evidence of the lack of reasonable efforts by Hecny to maintain the information's secrecy. (See Civ. Code, § 3426.1, subd. (d)(2).) Hecny's expert witness Jan Raymond testified that the documents allegedly containing trade secrets were not marked "confidential" and that no corporate policy precluded an employee from e-mailing these documents to an outside computer or uploading them to a file sharing Web site.
Jackie Larson, Hecny's human resources manager, testified that Sopko's customer files were left in unlocked drawers and that Sopko's office door and file drawers were left unlocked during the day. Further, when Sopko resigned from Hecny, there was no apparent transition plan with respect to documents in her office such as the shipment documentation (including classification information) that would have preserved the documents' confidentiality for the individual who later replaced Sopko.
Nor did anyone call Sopko after discovering the files were missing to ask whether she knew where they were or what had happened to them—even though Larson, Hecny's human resources manager, knew Sopko had handled them prior to her departure.
Plaintiffs respond with two primary arguments. First, they insist that while some information in the customer files may have been publicly available, Hecny gave the information independent economic value by painstakingly compiling it. Second, plaintiffs contend that Hecny did in fact take reasonable steps to maintain the secrecy of its customer information, pointing to policies in its employee manual requiring all employees to safeguard confidential information or face disciplinary measures and/or termination. (All employees had to sign a written acknowledgment that they had received, read and understood the terms in Hecny's employee manual.) Plaintiffs also point to certain "security measures" taken by Hecny to restrict nonemployee access to customer files by requiring them to sign in and out and to have an employee escort when visiting areas containing such files.
But an appellant cannot successfully challenge a jury's verdict by merely pointing to conflicting evidence. (Cabral v. Ralphs Grocery Co. (2011) 51 Cal.4th 764, 770; see Direct Technologies, LLC v. Electronic Arts, Inc. (9th Cir. 2016) 836 F.3d 1059, 1070-1071 [rejecting a litigant's position that the evidence compelled a finding of trade secret misappropriation where the evidence was in conflict].) Rather, the appellant must show that no substantial evidence whatsoever supports the jury's conclusion. (Cabral, at p. 770.) Here, this standard is not met.
Considering the evidence in the appropriate light—that which is most favorable to defendants as the prevailing party and indulging all legitimate and reasonable inferences to uphold the jury's verdict (Casella v. SouthWest Dealer Services, Inc. (2007) 157 Cal.App.4th 1127, 1144)—plaintiffs' challenge fails. V. The trial court properly ruled on Hecny's motion to tax costs.
Prior to trial, defendants made two sets of offers to settle under Code of Civil Procedure section 998. The first set, made by the OEC defendants on April 21, 2014, offered a "walkaway," meaning neither side would pay anything in settlement and costs and attorney fees would be waived. The second set, made on April 10, 2015 included all defendants, who joined in offering each of the Hecny entities $250,000. Neither set of offers was accepted.
After prevailing at trial, the OEC defendants filed a memorandum of costs seeking to recover their litigation costs, including expert fees incurred after plaintiffs rejected the earlier of their offers to compromise under Code of Civil Procedure section 998. "[A] plaintiff may recover postoffer costs of expert witness services if (1) the plaintiff makes an offer to compromise that conforms to the statutory time and content requirements; (2) the defendant does not accept the offer; and (3) the defendant does not obtain a more favorable result in the action." (Martinez v. Brownco Construction Co. (2013) 56 Cal.4th 1014, 1020 (Martinez).)
Plaintiffs moved to tax the expert witness fees, saying: (1) defendants' claimed costs were unnecessary, unreasonable and unsupported; (2) the 2015 offers were invalid because the amounts were uncertain; and (3) defendants' claimed costs included fees incurred prior to the 2015 offers. The trial court denied the motion as to these fees.
On appeal, plaintiffs raise three different arguments: (1) the 2014 offers were prematurely revoked before the end of the statutorily required acceptance period; (2) the 2014 offers were "token" offers made in bad faith; and (3) the 2015 offers were invalid because two of the five offerors, Callado and OES Global, were in bankruptcy and subject to an automatic stay when the offers were served.
A. Forfeited Arguments.
Defendants contend plaintiffs' appellate arguments are forfeited because they were not raised below in their notice of motion and motion to tax costs. Plaintiffs did argue that the 2014 offers were "token" offers in their reply brief in support of that motion on August 3, 2016. But they did not raise the other two issues until February 9, 2017, when they presented an unsuccessful ex parte application for leave to file a supplemental brief in support of their motion to tax costs just six days before the hearing and seven months after filing their motion.
That ex parte application attached a proposed supplemental brief in which plaintiffs sought to argue for the first time that defendants had prematurely revoked their 2014 offers and had made invalid 2015 offers in light of Callado's and OES Global's pending bankruptcies. On February 15, 2017, the trial court denied this application, and thus declined to "go back and review additional arguments, which could have been made in the original argument."
On March 14, 2017, defendants filed a supplemental declaration attaching newly obtained evidence supporting their cost requests. That same day, the trial court issued a tentative ruling on the motion to tax costs, granting it in part and denying it in part. The trial court said that the 2015 offers extinguished the 2014 offers for purposes of Code of Civil Procedure section 998. The next day (March 15), defendants filed a second supplemental declaration referring the court to Martinez, supra, 56 Cal.4th at pages 1014 and 1026, simply to show the Supreme Court had determined a later offer does not extinguish an earlier offer.
Plaintiffs objected to defendants' March 14 and 15, 2017 filings. On March 20, 2017, the court continued the hearing on plaintiffs' motion for a month and ordered that "[c]ounsel for Plaintiffs shall have until April 13, 2017 to file and serve their response to Defendants' supplemental papers improperly filed on March 14, 2017 and March 15, 2016 [sic]."
On April 13, 2017, a few days before the continued hearing, plaintiffs filed a 13-page supplemental brief responding to defendants' supplemental papers and, in particular, to defendants' reference to the Martinez case as defeating plaintiffs' claim that the 2014 offers were extinguished. In doing so, plaintiffs went well beyond the simple point that a later offer does not extinguish an earlier offer. Instead, they argued Martinez does not apply because, inter alia, the 2015 offers were void due to Callado's and OES Global's bankruptcies and the 2014 offers had been prematurely revoked and, in any event, were made in bad faith. Plaintiffs' supplemental filing included a request for judicial notice of documents related to the offerors' bankruptcies. That was a "backdoor" effort to raise the arguments the court had already determined were untimely.
The hearing on plaintiffs' motion was held April 20, 2017, after which the trial court issued its written order. With regard to defendants' expert fees, the court rejected plaintiffs' arguments that the offers were unduly vague and uncertain and that the 2015 offers extinguished the 2014 offers. It cited Martinez, supra, 56 Cal.4th at pages 1024-1026, just for the proposition that a party may claim the benefit of an earlier Code of Civil Procedure section 998 offer when seeking to recover expert witness fees so long as the offers were "sufficient and made in good faith." The court did not address the arguments first raised in plaintiffs' unsuccessful ex parte application relating to premature revocation of the 2014 offers and the impact of the offerors' bankruptcies on the validity of the 2015 offers.
Having considered this entire record, we conclude plaintiffs forfeited their right to raise on appeal the issues of whether the 2014 offers were prematurely revoked and whether the 2015 offers were invalid in light of the bankruptcies of two of the five offerors when the offers were served. Plaintiffs have never challenged—here or below—the trial court's denial of their ex parte request to belatedly raise these arguments. (See City of Corona v. Liston Brick Co. (2012) 208 Cal.App.4th 536, 542 [issue not raised in opening brief was forfeited on appeal]; Lewinter v. Genmar Industries, Inc. (1994) 26 Cal.App.4th 1214, 1224 [plaintiff precluded from challenging a lower court ruling for the first time on appeal].) Thus, that issue is not before us.
While plaintiffs clearly made two attempts to present these issues to the trial court, they did so notwithstanding the court's orders, first, to deny their application for leave to file supplemental papers and, second, to file supplemental papers limited to issues raised in defendants' March 14 and 15, 2017 papers. Clearly, the trial court stuck to its ruling on the ex parte application and did not consider those issues.
Specifically, plaintiffs were invited by the court to respond to defendants' supplemental declaration calling attention to Martinez, in which the California Supreme Court held that "where, as here, a plaintiff serves two unaccepted and unrevoked statutory offers, and the defendant fails to obtain a judgment more favorable than either offer, the trial court retains discretion to order payment of expert witness costs incurred from the date of the first offer." (Martinez, supra, 56 Cal.4th at p. 1026.) Plaintiffs, in their response, argued this case is distinguishable from Martinez because the 2014 offers were prematurely revoked and because the 2015 offers were invalid in light of the offerors' bankruptcies. In its order, the trial court relied on Martinez to reject plaintiffs' properly raised argument that the 2014 had been extinguished without mentioning, much less ruling on, these other arguments. Plaintiffs have not sought review of the court's finding under Martinez that the 2014 offers were not extinguished by the 2015 offers.
On this record, plaintiffs may have preserved the issue of whether the trial court abused its discretion in denying the ex parte application and not permitting further briefing of the topics they raise here. But plaintiffs have not appealed that. Instead, they have sought review of issues not properly presented to the trial court. In this context, plaintiffs' actions were insufficient to preserve those issues for appeal. (See Santantonio v. Westinghouse Broadcasting Co. (1994) 25 Cal.App.4th 102, 113 [declining to consider a new ground for invalidating a Code of Civil Procedure section 998 offer not raised in the appellant's moving papers in the trial court even though it was urged by trial counsel at oral argument on the motion to tax costs and concluding: "Having failed to raise the issue in the trial court, the issue was waived, and we will not consider it for the first time on appeal"] (Santantonio).) As our colleagues in the Second Appellate District explained when rejecting a plaintiff's "attempt[] to avoid the cost shifting purpose behind [Code of Civil Procedure] section 998 based on a claimed procedural defect devised by his appellate counsel for the first time on appeal," if the statutory purpose behind Code of Civil Procedure section 998 is to be served, the court "cannot permit [the plaintiff] to avoid the consequences of his decision by claiming now that the offer ought to be construed as one which he could not have accepted anyway." (Id. at p. 114.)
But even if we were to assume there was no forfeiture, we would reject plaintiffs' arguments on the merits. First, we fail to grasp the significance of the two offerors' bankruptcies given that the 2015 offers, on their face, provide that defendants would be jointly and severally responsible for payment of the judgment. Plaintiffs direct us to no authority holding that a Code of Civil Procedure section 998 offer is invalid if one of several offerors is unable to pay the judgment, and the case law suggests otherwise. (See Santantonio, supra, 25 Cal.App.4th at pp. 114-115 [an offer of compromise is properly read as an offer by each defendant to plaintiff that judgment in the offer's amount may be taken against each defendant, jointly and severally].)
Second, we find the 2014 offers were not prematurely revoked. Code of Civil Procedure section 998, subdivision (b)(2) provides that if "the offer is not accepted prior to trial or within 30 days after it is made, whichever occurs first, it shall be deemed withdrawn . . . ." Here, defendants served their 2014 offers by mail on April 21, 2014. The 2014 offers stated in relevant part: "Under California Code of Civil Procedure § 998, this offer shall remain open to and including 5:00 p.m., on May 26, 2014, at which time, if this Statutory Offer to Compromise is not accepted, shall be deemed permanently withdrawn, under California Code of Civil Procedure § 998." Thus, after applying the statutorily required five additional calendar days for service by mail, defendants' offers, by their terms, were set to expire in accordance with Code of Civil Procedure section 998's designated time period. (Code Civ Proc., §§ 998, subd. (b)(2), 1013, subd. (a); see Poster v. Southern Cal. Rapid Transit Dist. (1990) 52 Cal.3d 266, 273-274 [applying the statutory "service by mail" rule to a section 998 offer].) However, May 26, 2014, was a holiday (Memorial Day) (see Gov. Code, § 6700, subd. (a)(7)), thereby triggering another provision, Code of Civil Procedure section 12a, which provides: "If the last day for the performance of any act provided or required by law to be performed within a specified period of time is a holiday, then that period is hereby extended to and including the next day that is not a holiday. . . ." "This section applies to Sections 659, 659a, and 921, and to all other provisions of law providing or requiring an act to be performed on a particular day or within a specified period of time, whether expressed in this or any other code or statute, ordinance, rule, or regulation." (Code Civ. Proc., § 12a, subds. (a), (b), italics added.)
Plaintiffs insist Code of Civil Procedure section 12a did not apply to automatically extend the statutory period for accepting the 2014 offers from Monday, May 26, to Tuesday, May 27. According to plaintiffs, the 2014 offers must therefore be deemed to have been prematurely revoked because, regardless of the statutory rules, "OEC had every right to set the expiration of its settlement offers on May 26, 2014, before the statutory expiration on May 27." We disagree.
Not only does plaintiffs' argument run counter to the language of Code of Civil Procedure section 12a extending the last day for performance of any act provided by statutory law to be performed within a specified time period to "the next day that is not a holiday," it runs counter to our state's public policy to broadly construe Code of Civil Procedure section 998 offers so as to encourage settlements before trial. (Code Civ. Proc., § 12a, subd. (a); T. M. Cobb Co. v. Superior Court (1984) 36 Cal.3d 273, 280; see Martinez, supra, 56 Cal.4th at p. 1024 ["a basic contract law principle may not be applied if it would defeat or conflict with [Code of Civil Procedure] section 998's policy of encouraging settlement"]; cf. Gans v. Smull (2003) 111 Cal.App.4th 985, 990 [Code of Civil Procedure section 12a does not apply to acts governed solely by contractual provisions, as "[the Legislature's] omission of the 'or contract' language from Code of Civil Procedure section 12a, while using that language in Civil Code sections 9 and 11, evidences an intent to exclude contracts from the purview of that section"].)
OEC's offer expressly stated, "Under California Code of Civil Procedure § 998, this offer shall remain open to and including 5:00 p.m., on May 26, 2014, at which time, if this Statutory Offer to Compromise is not accepted, shall be deemed permanently withdrawn, under California Code of Civil Procedure § 998." (Original italics.) Not once, but twice, OEC signaled that its offer was governed by the terms of section 998. This was not a situation in which it was withdrawing its offer prior to the full statutory period. It twice referenced and incorporated the statutory period.
Accordingly, plaintiffs' arguments, if not forfeited, would fail on substantive grounds.
B. No "Token" Offers.
One issue remains. We conclude plaintiffs have not forfeited the right to raise their third and final issue—whether the 2014 offers were unreasonable and unrealistic "token" offers. At oral argument counsel conceded this issue has been preserved.
" 'A prevailing party who has made a valid pretrial offer pursuant to Code of Civil Procedure section 998 is eligible for specified costs, so long as the offer was reasonable and made in good faith. [Citation.]' [Citation.] 'Whether a [Code of Civil Procedure] section 998 offer was reasonable and made in good faith is a matter left to the sound discretion of the trial court, and will not be reversed on appeal except for a clear abuse of discretion.' [Citation.] ' "In reviewing an award of costs and fees under Code of Civil Procedure section 998, the appellate court will examine the circumstances of the case to determine if the trial court abused its discretion in evaluating the reasonableness of the offer or its refusal." [Citation.]' [Citation.] On appeal, the burden is on the party complaining to establish an abuse of discretion, and unless a clear case of abuse is shown along with a miscarriage of justice, a reviewing court will not substitute its opinion and thereby divest the trial court of its discretionary power. [Citation.] Such a discretionary ruling will not be disturbed on appeal absent a showing that discretion was exercised in an arbitrary, capricious or patently absurd manner that resulted in a manifest miscarriage of justice." (Najera v. Huerta (2011) 191 Cal.App.4th 872, 877; see Nelson v. Anderson (1999) 72 Cal.App.4th 111, 134.)
Plaintiffs argue the 2014 offers to waive costs and attorney fees were "neither reasonable nor realistic" as evidenced by the fact that, after the trial court dismissed their breach of contract claim in November 2014 on summary adjudication, thereby greatly reducing defendants' exposure to liability, defendants in 2015 offered each plaintiff $250,000. Plaintiffs reason, "The 2015 Offers totaling $500,000 show that OEC faced far more than a slight probability of liability in April 2014 when it made its token offers."
We reject this reasoning. As an initial matter, whether a Code of Civil Procedure section 998 offer is made in bad faith should be assessed at the time the offer was made, not from the perspective of a year later after the case has continued to develop. (See Hartline v. Kaiser Foundation Hospitals (2005) 132 Cal.App.4th 458, 471 [the reasonableness of a Code of Civil Procedure section 998 offer is judged by examining the circumstances existing at the time the offer was made].) Moreover, when the 2014 offers are assessed from the proper perspective, there is nothing in the record proving they were made in bad faith. For one, a waiver of costs and attorney fees is not necessarily a token offer: "There is no per se violation of the good faith requirement just because the offer does not tender a net monetary sum. . . . [A] waiver of costs may be an offer of significant value." (Ibid.) And, here, we conclude the trial court, having heard the entire case, was in a far better position than this court to determine whether the offers were reasonable. Accordingly, having been shown no clear basis for finding an abuse of discretion, we defer to the trial court's reasoned decision. (Evers v. Cornelson (1984) 163 Cal.App.3d 310, 314-315; Huber, Hunt & Nichols, Inc. v. Moore (1977) 67 Cal.App.3d 278, 315.) The order to deny in part and grant in part plaintiffs' motion to tax costs stands.
DISPOSITION
The judgment and posttrial order on plaintiffs' motion to tax costs are affirmed.
/s/_________
Goode, J. WE CONCUR: /s/_________
Fujisaki, Acting P. J. /s/_________
Petrou, J.
Retired Judge of the Superior Court of Contra Costa County, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.