Opinion
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
San Mateo County Super. Ct. No. CIV463086
McGuiness, P.J.
Webcor Construction LP (Webcor) appeals from an order denying its motion for a preliminary injunction. Webcor sought to enjoin two former employees and the business entities with which they were then associated from using or disclosing trade secrets allegedly misappropriated from Webcor. Finding no abuse of discretion, we affirm the order.
Factual and Procedural Background
Webcor is a large construction company based in San Mateo. Among its business units is Webcor Concrete, which performs concrete work for Webcor and other contractors throughout California.
Ross Edwards was a long-time employee of Webcor who eventually became a senior vice president of the company as well as the head of Webcor Concrete. In early March 2007, Edwards, along with another Webcor senior vice president, informed Webcor they would be leaving by the end of the month to start their own business. Their newly formed business was a set of related entities formed under parent company Build Construction Group, LLC (collectively referred to as “Build Group”), including a structural concrete subcontractor that competes directly with Webcor.
In late March 2007, Webcor discovered that Edwards had been “emailing quantities of Webcor documents to his wife’s email address,” including “confidential and proprietary information.” Webcor terminated Edwards on March 30, 2007, and cut off his access to its computer network and facilities.
David Williams held the position of chief estimator for Webcor Concrete. Williams was responsible for developing cost estimates from Webcor’s estimator database to be used when bidding on new construction projects and adjusting cost estimates on existing projects. In March 2007, Webcor learned that Williams was planning to join Edwards’s competing venture at Build Group. On March 29, 2007, Webcor fired Williams effective the following day and informed him that he should return all of Webcor’s property.
Following their termination, Edwards and three other former Webcor executives filed a complaint against Webcor for wrongful termination, breach of fiduciary duties, and fraud, among other causes of action. Webcor filed a cross-complaint against the four plaintiffs named in the complaint, Williams, and Build Group. The cross-complaint contains 12 causes of action, including breach of the duty of loyalty, misappropriation of trade secrets under Civil Code section 3426 et seq., and unfair competition under Business and Professions Code section 17200 et seq.
On August 1, 2007, Webcor filed an application for a temporary restraining order against Edwards, Williams, and Build Group, pending a hearing on a preliminary injunction. Webcor sought to restrain and enjoin Edwards, Williams, and Build Group from disclosing or using Webcor trade secrets or confidential information, including information concerning its estimates, financial data, profit forecasts, bid criteria, business development, special projects, status reports, and quarterly meeting notes. In addition, Webcor sought the return of all Webcor documents and requested that Edwards, Williams, and Build Group be restrained from using, altering, or destroying certain electronic files. The trial court granted the temporary restraining order and ordered Edwards, Williams, and Build Group to show cause why the court should not issue a preliminary injunction.
Webcor submitted a number of declarations in support of the preliminary injunction. Webcor’s vice president of estimating explained that its estimate information is critical to its business. In 2000, Webcor purchased estimator software from Timberline Software and customized the software to fit its specific needs. Over time, Webcor updated the database associated with the program to include customized line items, building specifications, project information, and cost details, all for the purpose of facilitating bids on construction projects. Webcor Concrete further customized the database to meet the specific needs of estimates for projects requiring concrete.
Webcor’s vice president of estimating stated it was his understanding that anyone with Timberline estimating software could open one of Webcor’s estimating files and gain access to the customized fields in the database concerning Webcor’s historical cost and bid information. However, the database is password protected, and only a limited number of employees have the password.
Webcor’s employee handbook contains a section concerning nondisclosure of the company’s confidential information and trade secrets. As described in the handbook, Webcor employees are forbidden to copy or remove any Webcor documents and must protect the company’s proprietary, confidential, and trade secret information, which is defined to include costs, bid information, and methods of estimating and bidding. Both Edwards and Williams acknowledged receiving the Webcor employee handbook.
On his last day at Webcor, Williams returned his company laptop computer. A Webcor employee removed the hard drive from the laptop computer and sent it to Don Vilfer, the president of a company specializing in computer forensics. Vilfer determined that a “thumb drive” had been inserted into the computer on March 30, 2007, Williams’s last day at Webcor. A thumb drive is a USB storage device that fits into the USB port of a computer and acts as a miniature hard drive. A computer user may transfer large amounts of data from the computer to a thumb drive. Vilfer’s examination of the computer registry revealed that a large number of files were accessed in quick succession around the time the thumb drive was inserted, “suggesting the possible copying of these documents.” According to Vilfer, over 500 files were accessed in the 10 minutes following insertion of the thumb drive, “suggesting a large copying effort.” Vilfer produced a spreadsheet of the files accessed on Williams’s computer. Webcor’s chief information officer stated that the accessed folders related to existing and potential projects as well as projects on which Webcor was an unsuccessful bidder. The accessed information related to over 80 specific Webcor projects.
Examining Edwards’s computer presented a different challenge. Webcor’s chief information officer stated that he discovered the computer in Edwards’s office on March 29, 2007, the day after Webcor had cut off Edwards’s access to the company’s computer network and facilities. The computer was smoldering, emitting a foul, chemical odor, and had a significant amount of damage to its exterior, portions of which were punctured and had melted. Webcor sent the damaged computer to Vilfer for analysis. Because the computer’s hard drive was damaged, Vilfer sent the computer and hard drive to a separate contractor, who was able to access information on the hard drive. Vilfer was informed the puncture marks on the computer were consistent with damage that might result from the computer being connected to a high-voltage worksite generator.
Information on the hard drive indicated the computer was functioning normally on the last day it was being used, with Edwards signed in as the user in the early morning hours of March 29, 2007. An examination of registry information on the hard drive revealed that documents on a thumb drive or “flash memory device” had been accessed from the computer at 2:55 a.m. and again at 3:47 a.m. Over 700 files and file folders were accessed on Edwards’s computer between 2:37 a.m. and 3:56 a.m. The evidence “strongly indicate[d] that those files were either printed, moved or copied by the user, possibly onto external media.” Vilfer attached a list of the accessed files to his declaration. According to Webcor’s chief information officer, the accessed files and file folders relate to Webcor projects, financial information, estimating, bid criteria, quarterly meeting notes, special projects, status reports, profits forecasts, client and subcontractor lists, and wage and bonus information.
In opposition to the application for a preliminary injunction, Williams submitted a declaration in which he described as “categorically untrue” the allegation he had downloaded and copied hundreds of proprietary and confidential Webcor files before returning his company-issued laptop. Williams admitted he had accessed files on his computer but claimed he had done so in order to organize the Webcor files on the computer to make them more useable and organized for employees who might seek to access them after his departure. He also admitted inserting two thumb drives into the laptop in an effort to copy personal files he had maintained on his company laptop. He claimed the effort was unsuccessful. Williams denied downloading, copying, or transferring any Webcor files from the laptop to any thumb drive or other device. Williams stated that neither he nor Build Group had any Webcor estimating files. Further, he indicated in his declaration that neither he nor Build Group had a copy of or access to Timberline estimating software, which would be required to access and use any Webcor estimating files.
Edwards also presented a declaration in opposition to the motion for a preliminary injunction, although it was considerably more concise than Williams’s declaration. Edwards did not specifically address the allegation raised by the computer forensic expert, Vilfer, suggesting he had copied files from his company computer in the early morning hours of March 29, 2007. Indeed, he did not confirm or deny accessing his computer at that time. Instead, he stated he did “not have possession of any electronic or hard copies of any of the data or materials listed in the spread sheets” attached to Vilfer’s declaration. He further stated he had not used and did not intend to use the listed materials, nor had he shared them with anyone, including with persons at Build Group. Edwards confirmed he had never owned Timberline software. Based upon his 23 years in the construction industry, Edwards opined that construction estimating requires up-to-date information. According to Edwards, the use of outdated information relating to older projects is of limited value because of constantly changing market conditions.
Three other former Webcor executives who left to join Build Group—the other three plaintiffs in the original complaint against Webcor—also submitted declarations in opposition to the motion for a preliminary injunction. All of the declarants stated they had never seen or used any of the documents in the listing attached to the Vilfer declaration since leaving Webcor and joining Build Group. All the declarants also confirmed they had never owned Timberline software.
Also submitted in opposition to the motion for a preliminary injunction was a declaration from a computer forensic specialist, Phillip Cooper. After reviewing Vilfer’s declaration, Cooper stated Vilfer had failed “to show any evidence to substantiate the claim that any data was printed, moved or copied by the user.” Cooper pointed out there was nothing to confirm data had been copied onto external media, such as a thumb drive, and he opined that registry information reflecting file access at a particular time might be the result of automatic virus scanning or file backup software, and not copying initiated by a computer user.
In a declaration responding to Cooper, Vilfer agreed that virus scans can access computer files and that such access could be misinterpreted as user-initiated. However, Vilfer also claimed to have looked for evidence of alternative explanations for the files being accessed, such as virus scans, and found none.
Following a hearing, the court denied the motion for a preliminary injunction, concluding as follows: “The court is aware of the test to be employed in whether or not to issue an injunction. The likelihood that the moving party will ultimately prevail and the relative interim harm to the parties that might be caused by the issuance or non-issuance of an injunction. [¶] The court is of the view that [Webcor] has failed to show that there is any harm—interim harm to be caused. [¶] I don’t think the evidence supports a finding that the files were actually downloaded. It may be suggestive, but that simply isn’t enough in my view to warrant the issuing of the injunction and [Webcor’s] request for a preliminary injunction is denied.” Webcor timely appealed from the order denying the preliminary injunction.
Discussion
Webcor contends the trial court erred in failing to enjoin the use of trade secret information allegedly copied by Edwards and Williams. It argues the confidential information at issue constitutes a protectable trade secret and that the court ignored the evidence in finding that the confidential information was not downloaded and that Webcor would suffer no interim harm if injunctive relief were denied. Webcor also asserts it is entitled to injunctive relief under Business and Professions Code section 17200 et seq., regardless of whether the information purportedly misappropriated by Edwards and Williams qualifies as a trade secret.
1. Standard of Review
“Injunctions in the area of trade secrets are governed by the principles applicable to injunctions in general. [Citation.] ‘In deciding whether to issue a preliminary injunction, a trial court weighs two interrelated factors: the likelihood the moving party ultimately will prevail on the merits, and the relative interim harm to the parties from the issuance or nonissuance of the injunction.’ [Citation.] ‘ “Generally, the ruling on an application for preliminary injunction rests in the sound discretion of the trial court. The exercise of that discretion will not be disturbed on appeal absent a showing that it has been abused.” [Citations.]’ [Citation.]” (Whyte v. Schlage Lock Co. (2002) 101 Cal.App.4th 1443, 1449-1450 (Whyte).) “A trial court abuses its discretion when its decision exceeds the bounds of reason by being arbitrary, capricious or patently absurd. [Citation.]” (Dodge, Warren & Peters Ins. Services, Inc. v. Riley (2003) 105 Cal.App.4th 1414, 1420.) “Denial of a preliminary injunction will be upheld on appeal if the trial court did not abuse its discretion with respect to either the question of success on the merits or the question of irreparable harm. [Citation.]” (Whyte, supra, 101 Cal.App.4th at p. 1450.)
When the likelihood of prevailing on the merits turns on a question of law, such as the construction of a statute, and the facts are not in dispute, our review is de novo. (Alliant Ins. Services, Inc. v. Gaddy (2008) 159 Cal.App.4th 1292, 1300.) However, when “ ‘the evidence before the trial court was in conflict, we do not reweigh it or determine the credibility of witnesses on appeal.’ ” (City of Corona v. Naulls (2008) 166 Cal.App.4th 418, 427.) “ ‘ “[T]he trial court is the judge of the credibility of the affidavits filed in support of the application for preliminary injunction and it is that court’s province to resolve conflicts.” ’ [Citation.] Thus, even when presented by declaration, ‘if the evidence on the application is in conflict, we must interpret the facts in the light most favorable to the prevailing party and indulge in all reasonable inferences in support of the trial court’s order.’ [Citation.]” (Whyte, supra, 101 Cal.App.4th at p. 1450; accord Dodge, Warren & Peters Ins. Services, Inc. v. Riley, supra, 105 Cal.App.4th at p. 1420.)
2. Trade Secret Misappropriation
We turn to the question of whether the trial court abused its discretion in denying the preliminary injunction, focusing first on Webcor’s claim that Edwards, Williams, and Build Group had misappropriated its trade secrets. For purposes of this analysis, we will assume the information in the files purportedly copied by Williams and Edwards qualifies as a trade secret.
To assess Webcor’s likelihood of prevailing on the merits of its trade secret claim, we consider whether it established that Williams and Edwards engaged in actual or threatened misappropriation of a trade secret—activities courts may enjoin. (Civ. Code, § 3426.2, subd. (a).) Generally speaking, misappropriation is the improper acquisition of a trade secret or its nonconsensual use or disclosure. (Civ. Code, § 3426.1, subd. (b); see Morlife, Inc. v. Perry (1997) 56 Cal.App.4th 1514, 1523.)
Webcor asserts that the facts “strongly indicate” Williams and Edwards took its files and records for their new business venture. It also claims the court abused its discretion by “ignoring the overwhelming weight of evidence” showing Williams and Edwards downloaded hundreds of files containing confidential information. Webcor misperceives our role as a reviewing court. The evidence may indeed suggest an effort by Williams and Edwards to surreptitiously copy Webcor’s confidential information before leaving the company. However, the evidence is in conflict, and it is not for us to reweigh that evidence or determine whether the declarants are credible.
The analysis in Whyte is instructive. There, an employer claimed its former employee had misappropriated trade secrets. (Whyte, supra, 101 Cal.App.4th at pp. 1448-1449.) The employer offered evidence to support the charges of misappropriation. The former employee denied the charges and argued that nobody at his former employer had personal knowledge of any actual or threatened misappropriation. The appellate court noted both sides had offered support for their respective positions. (Id. at pp. 1457-1458.) However, because it was constrained to “ ‘interpret the facts in the light most favorably to the prevailing party and indulge in all reasonable inferences in support of the trial court’s order,’ ” the appellate court upheld the trial court’s order denying a preliminary injunction, notwithstanding “serious concerns over evidence in the record suggesting [the former employee] took [the employer’s] trade secrets or destroyed evidence.” (Id. at p. 1458.)
Here, too, the evidence is in conflict. Although Webcor offered evidence suggesting that Williams copied Webcor’s files, Williams categorically denied the allegation and offered an alternative explanation for the circumstantial evidence presented by Webcor. The trial court implicitly determined Williams was credible and discounted Webcor’s circumstantial evidence.
Unlike Williams, Edwards did not specifically respond to the allegation he had downloaded files. His declaration is remarkable for what it does not say. He does not deny downloading files in the early morning hours of March 29, 2007, nor does he deny that he had them in his possession at some point in time. It is for this reason Webcor contends Edwards “admitted” downloading the files. There was no such admission.
Although Edwards did not specifically deny the allegation he had downloaded files, he did offer the declaration of an expert questioning the inferences drawn by Webcor’s expert from the circumstantial evidence. The inference that Edwards downloaded files was not the only one that could be drawn from the computer forensic evidence. The files might have been accessed by automated virus scanning or backup software, and the mere fact files were accessed does not compel the conclusion they were copied onto external media for Edwards to take with him. Against this circumstantial evidence of misappropriation, Edwards specifically denied possessing the files, sharing them with Build Group, or having the software necessary to access the files. Indulging all reasonable inferences in favor of the trial court’s order, we conclude the trial court did not abuse its discretion in finding that Webcor had failed to establish a likelihood of success on the merits of its trade secret misappropriation claim.
Because we conclude substantial evidence supports the trial court’s conclusion with regard to actual or threatened misappropriation, we need not reach the question of whether the allegedly misappropriated information qualifies as a trade secret under Civil Code section 3426 et seq.
We emphasize that our decision is not a final adjudication on the issue of actual or threatened misappropriation of trade secrets. Like the court in Whyte, we have serious reservations about evidence that strongly suggests Edwards and Williams may have copied confidential files. However, our consideration of the issue is constrained by the applicable standard of review from the denial of a preliminary injunction.
Because we will uphold the order if the court did not abuse its discretion with respect to either the question of the likelihood of success on the merits or the question of irreparable harm, it is unnecessary for us to consider whether the court erred in concluding that Webcor would not suffer irreparable harm absent injunctive relief. (See Whyte, supra, 101 Cal.App.4th at p. 1450.)
We note, however, that it was not an abuse of discretion to find no interim harm to Webcor when there was evidence that neither Williams, Edwards, nor Build Group had possession of, or the ability to use, the confidential information they had allegedly misappropriated. The trial court could find their statements credible and conclude there was no risk of harm to Webcor. Further, there was no evidence Build Group had used the purportedly misappropriated information to the detriment of Webcor.
We conclude it was not an abuse of discretion for the court to deny a preliminary injunction premised on the actual or threatened misappropriation of trade secrets.
3. Business and Professions Code Section 17200
Webcor contends the trial court erred to the extent its denial of injunctive relief was based exclusively on the Uniform Trade Secrets Act (Civ. Code, § 3426 et seq.). It asserts that, even if the Webcor information at issue does not qualify as a trade secret, the injunction should still be granted under Business and Professions Code section 17200 et seq. to enjoin an unfair business practice.
Our analysis does not turn upon whether the allegedly misappropriated information is a trade secret. Thus, our conclusions with respect to the probability of success on the merits and the question of irreparable harm apply with equal force to a consideration of whether injunctive relief is available under Business and Professions Code section 17200 et seq.
Disposition
The order denying a preliminary injunction is affirmed. Respondents shall recover their costs on appeal.
We concur: Pollak, J., Siggins, J.