Knight v. Super. Ct. CA4/1 ( 2013 )

Filed 6/6/13 Knight v. Super. Ct. CA4/1
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COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
MARK KNIGHT, D063819
Petitioner, (Imperial County
Super. Ct. No. ECU06566)
v.
THE SUPERIOR COURT OF IMPERIAL
COUNTY,
Respondent;
CHAD KEY et al.,
Real Parties in Interest.
PROCEEDINGS in mandate after superior court denied motion to quash
deposition subpoena. Juan Ulloa, Judge. Petition granted in part.
FACTUAL AND PROCEDURAL BACKGROUND
Chad Key and 24 real parties in interest (the homeowners) filed a civil suit against
D.R. Horton, Inc. (D.R. Horton) and others. In their second amended complaint, the
homeowners assert a single cause of action for violation of the building standards for
original construction pursuant to Civil Code section 896 et seq. Generally, the
homeowners allege that the houses in their development—built by D.R. Horton and the
other defendants—are materially defective and deficient in a number of ways. They seek
damages to cover the cost of repairing their homes and to compensate them for
consequential and incidental damages.
Petitioner Mark Knight is not a party to this action. Knight is the president of
FrontLine Response, LLC (FrontLine), an "independent company that contracts with
home builders to serve as an extension of their warranty department. In that capacity,
FrontLine, with permission from homeowners, investigates issues homeowners may have
with their home and forwards the requested repairs to the builder." D.R. Horton retained
FrontLine to contact the homeowners after they initiated this litigation. FrontLine
employees talked to the homeowners and offered to have their houses fixed in return for
the homeowners signing a form letter asking their attorney to dismiss them from this
action. The homeowners contend this conduct violates Civil Code section 913, which
prohibits a builder or its representatives from contacting plaintiffs outside the presence of
their attorney.
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The homeowners served a deposition subpoena on Knight, seeking to take his
deposition and asking him to produce certain documents. Knight's petition concerns only
two of those document requests: those seeking (1) "training materials provided by
FrontLine Response, LLC to employees"; and (2) information about "payments received
by YOU from D.R. Horton for work performed regarding any homes involved in the
lawsuit."
Knight moved to quash the deposition subpoena. In a declaration, Knight asserts
that the requested training materials include trade secret information which is not subject
to disclosure. Knight also contends the request for documents concerning payments by
D.R. Horton to FrontLine violates his right to privacy regarding financial information.
The trial court denied the motion to quash. At the hearing on the motion, the court
acknowledged the training manual constitutes a trade secret, but found the information
could be adequately shielded by a protective order. According to the court, disclosure is
warranted because "all of those matters seem, to me, to be relevant at least in terms of
possibly leading to discoverable or admissible evidence."
In this petition, Knight contends the denial was improper and asks us to direct the
trial court to limit the ordered production. We requested an informal response to the
petition and issued Palma notice. (Palma v. U.S. Industrial Fasteners, Inc. (1984) 36
Cal. 3d 171, 178.)
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DISCUSSION
According to Knight, FrontLine derives economic value from its training manual,
which includes information and techniques not generally known by other similar
businesses in its "niche industry." FrontLine takes several measures to protect the
manual from disclosure. The homeowners do not challenge Knight's declaration or
otherwise dispute that the FrontLine training materials are a protected trade secret as
defined by Civil Code section 3426.1, subdivision (d).
Evidence Code section 1060 creates a privilege for trade secrets and authorizes the
owner of a trade secret to refuse to disclose the secret "if the allowance of the privilege
will not tend to conceal fraud or otherwise work injustice." In Bridgestone/Firestone,
Inc. v. Superior Court (1992) 7 Cal. App. 4th 1384, the court applied Evidence Code
section 1060 in the context of civil discovery. The court held that it would be error to
order disclosure of a trade secret simply because such information would be discoverable
under the general standard for discovery of matter that " 'appears reasonably calculated to
lead to the discovery of admissible evidence.' " (Bridgestone/Firestone, Inc. v. Superior
Court, supra, at p. 1390; see also Code Civ. Proc., § 2017.010.) As the court explained,
that standard applies only to matters that are not privileged. (Bridgestone/Firestone, Inc.
v. Superior Court, supra, at pp. 1390-1391.) Because Evidence Code section 1060
creates a privilege for trade secrets, use of a heightened standard is necessary before
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disclosure of documents containing trade secrets will be compelled.
(Bridgestone/Firestone, Inc. v. Superior Court, supra, at p. 1393.)
Under this heightened standard, the party seeking discovery "must make a prima
facie, particularized showing that the information sought is relevant and necessary to the
proof of, or defense against, a material element of one or more causes of action presented
in the case, and that it is reasonable to conclude that the information sought is essential to
a fair resolution of the lawsuit." (Bridgestone/Firestone, Inc. v. Superior Court, supra, 7
Cal.App.4th at p. 1393.)
Here, rather than applying the heightened standard for discovery of a privileged
trade secret, the respondent court applied the general standard for discovery under Code
of Civil Procedure section 2017.010. The court found the training manual was subject to
discovery because "all of those matters seem, to me, to be relevant at least in terms of
possibly leading to discoverable or admissible evidence." This discovery standard does
not apply to privileged trade secret documents. (Bridgestone/Firestone, Inc. v. Superior
Court, supra, 7 Cal.App.4th at p. 1390.)
Although the court also ordered the parties to prepare a protective order in an
attempt to protect the trade secret information, such an order is appropriate only after the
party seeking discovery meets its burden of establishing that the information sought is
directly relevant and its disclosure is necessary. (Bridgestone/Firestone, Inc. v. Superior
Court, supra, at p. 1393.) The court could not have required disclosure subject to a
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protective order unless it first found that the homeowners met their burden. By failing to
do so, the court erred.
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Because Knight's entitlement to relief is clear and the law is well-settled, we
conclude a peremptory writ in the first instance is proper. (Code of Civ. Proc., § 1088;
Alexander v. Superior Court (1993) 5 Cal. 4th 1218, 1222-1223, disapproved on another
ground in Hassan v. Mercy American River Hospital (2003) 31 Cal. 4th 709, 724, fn. 4;
Ng v. Superior Court (1992) 4 Cal. 4th 29, 35.)
DISPOSITION
Let a writ of mandate issue directing the superior court to vacate its March 5, 2013
order insofar as it directs Knight to provide trade secret information to real parties in
interest and to reconsider the issue under the proper standard. In all other respects, the
petition is denied. The stay issued by this court on May 7, 2013 is vacated. Knight is
entitled to costs in the writ proceeding. (Cal. Rules of Court, rule 8.493(a)(1)(A).) This
opinion is made final immediately as to this court. (Cal. Rules of Court, rule
8.490(b)(3).)
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IRION, J.
WE CONCUR:
O'ROURKE, J.
McINTYRE, Acting P. J.
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