Environmental Logistics v. Hayward CA4/1 ( 2023 )

Filed 8/25/23 Environmental Logistics v. Hayward CA4/1
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication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.
COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
ENVIRONMENTAL LOGISTICS, INC., D080515
et al.,
Plaintiffs and Appellants,
(Super. Ct. No. CIVDS1600695)
v.
ROBERT HAYWARD et al.,
Defendants and Respondents.
APPEAL from a judgment and orders of the Superior Court of
San Bernardino County, David Cohn, Judge. Affirmed.
Fennemore and Kevin Abbott for Plaintiffs and Appellants.
Tundis & Lester, Mark John Tundis and Alex D. Lester for Defendants
and Respondents Robert Hayward, Carol Suzette Hayward and HEC, Inc.
Disenhouse Law, Bruce E. Disenhouse and Gary O. Poteet, Jr. for
Defendant and Respondent Michael Tabush.
No appearance for Defendant and Respondent Suzann Alvarez.
No appearance for Defendant and Respondent Ernesto Alvarez.
Environmental Logistics, Inc. (ELI), Filter Recycling Services, Inc.
(FRS), and Variety Employment Corporation (VEC) (sometimes collectively,
Plaintiffs) work in tandem in the hazardous waste industry: ELI treats and
transports hazardous waste, FRS stores and recycles it, and VEC provides
ELI and FRS with employees in return for a percentage of profits. In this
action, Plaintiffs sued multiple defendants including three of VEC’s former
employees, Robert Hayward (R. Hayward), Michael Tabush (Tabush), and
Ernesto Alvarez (E. Alvarez), alleging that, while employed by VEC, they
interfered with current and future customer relationships of ELI and/or FRS
and misappropriated trade secrets and other confidential information.
Plaintiffs sought damages in excess of $37.55 million.
After weeks of trial, at the end of Plaintiffs’ case-in-chief, R. Hayward,
his wife defendant Carol Suzette Hayward (C. Hayward), and his company
defendant HEC, Inc. (collectively Hayward), Tabush, and E. Alvarez and his
wife defendant Suzanne Alvarez (S. Alvarez)1 (sometimes collectively,
Defendants), separately moved for nonsuit on all causes of action. Their
nonsuit motions followed an Evidence Code section 402 hearing in which the
trial court excluded the opinions of Plaintiffs’ damages expert. As a result
and for other reasons, the court granted Defendants’ nonsuit motions as to all
causes of action. In posttrial motions, the court awarded Hayward attorney
1 Neither E. Alvarez nor S. Alvarez filed a respondent’s brief in this
appeal. Nonetheless, we “examine the record on the basis of [Plaintiffs’] brief
and [will] reverse only if prejudicial error is found.” (Votaw Precision Tool
Co. v. Air Canada (1976) 60 Cal.App.3d 52, 55; accord, Carboni v. Arrospide
(1991) 2 Cal.App.4th 76, 80, fn. 2.)
2
fees and costs, and denied in part Plaintiffs’ motion to tax Tabush’s expert
witness fees.2
On appeal, Plaintiffs raise a series of contentions in support of their
reversal of the judgment and postjudgment motions. Among others, they
contend the trial court prejudicially erred when it: (1) granted the motions in
limine of Hayward and Tabush to exclude Plaintiffs’ waste management
expert, after it found Plaintiffs had acted unreasonably in waiting until the
eve of trial to make him available for a deposition; (2) excluded the opinions
of Plaintiffs’ damages expert based on its finding there was no “nexus”
between Plaintiffs fact of injury and resulting damages and Defendants’ acts;
(3) excluded hundreds of pages of documents attached to three e-mails
between R. Hayward and a competitor of Plaintiffs; (4) refused to allow
Plaintiffs to reopen their case-in-chief before granting Defendants’ nonsuit
motions; and (5) granted Hayward’s attorney fees motion and denied in part
Plaintiffs’ motion to tax Tabush’s expert fees.
As we explain, we conclude the trial court properly exercised its
discretion when it excluded Plaintiffs’ waste management expert, the
opinions of their damages expert, and the documents attached to the e-mails.
We further conclude the court did not err in refusing to allow Plaintiffs to
reopen their case-in-chief; and in awarding Hayward attorney fees and
denying in part Plaintiffs’ motion to tax Tabush’s expert fees.
I. FACTUAL AND PROCEDURAL BACKGROUND
In reviewing a judgment based on a nonsuit motion brought at the
conclusion of a plaintiff’s case-in-chief, we must accept as true the evidence
2 The trial court, however, denied Tabush’s motion for an award of
attorney fees and costs, which is the subject of a separate appeal. (See
Environmental Logistics, Inc., et al. v. Tabush, case No. D080516.)
3
most favorable to the plaintiff and disregard any conflicting evidence. (See
Nally v. Grace Community Church (1988) 47 Cal.3d 278, 291 (Nally); see also
Alpert v. Villa Romano Homeowners Assn. (2000) 81 Cal.App.4th 1320, 1328
(Alpert) [noting a nonsuit motion operates as a “demurrer” to a plaintiff’s
evidence].)
With this standard in mind, we turn first to Plaintiffs’ operative
complaint.
A. First Amended Complaint (FAC)
Plaintiffs alleged R. Hayward, Tabush, and E. Alvarez, as employees of
VEC, had access to Plaintiffs’ “proprietary and confidential information,”
including “confidential customer lists, confidential proprietary procedures,
processes, and methods for operation of a hazardous waste cleanup business,
confidential pricing information, confidential approved facilities, vendors, and
subcontractors information and their negotiated pricing (hereinafter, ‘Trade
Secrets’)[.]” Plaintiffs further alleged these employees misappropriated their
Trade Secrets and other confidential information by operating a competing
business servicing both current and future customers of ELI and/or FRS.
The FAC also alleged R. Hayward, Tabush, and E. Alvarez had access
to the “personal property” of ELI and/or FRS including “specialty custom-
made forms and templates,” “customers’ data info, manuals, and other
documents, as well as various hazardous waste cleanup supplies.” Plaintiffs
alleged R. Hayward “stole the supplies and the forms, E. Alvarez stole the
forms, and M. Tabush broke into a locked office and stole” customers’
information and other proprietary information; and then used this
information to “divert[ ] current and future business of Plaintiffs” to a
competitor.
4
Plaintiffs further alleged R. Hayward took personal property belonging
to ELI and/or FRS, used it while employed by VEC to conduct a competing
business, and returned the property, some of which he damaged, when he left
VEC in early January 2016; and that R. Hayward and others named in the
FAC, including former defendant Emiterio Mark Alvarez (M. Alvarez),3
created a new business4 and, between September 2013 and August 2014,
diverted projects from ELI and/or FRS to this competitor.
Plaintiffs asserted causes of action for conversion, misappropriation of
Trade Secrets, and unfair competition against Defendants (i.e., Hayward,
Tabush, E. Alvarez, and S. Alvarez). ELI and FRS separately asserted
causes of action for trespass to chattels and intentional interference with
prospective economic advantage against Defendants; and VEC, for itself only,
asserted a breach of contract cause of action against former employees R.
Hayward, Tabush, and E. Alvarez. Plaintiffs sought punitive damages
against Defendants on each of their tort-based causes of action.
In their first cause of action for conversion, Plaintiffs alleged
Defendants “substantially interfered” with Plaintiffs’ personal property
including custom-made forms and templates and property used in the
cleanup of hazardous waste by wrongfully taking possession of such property
and/or destroying it. Plaintiffs sought compensatory damages “in excess of
$260,000” (emphasis omitted).
3 There is no relation between E. Alvarez and former defendant
M. Alvarez.
4 The FAC refers to this business as “Enviro Pros, LLC” and
“Enviropros.” For consistency, we will refer to this former defendant as
“Enviropros.”
5
In their second cause of action for trespass to chattels, ELI and FCS
alleged Defendants intentionally and substantially interfered with their
personal property including “first responder vehicles with special equipment,”
cell phones and computers, and hazardous waste cleanup gear. ELI and FCS
sought compensatory damages “in excess of $282,400” (emphasis omitted).
In their third cause of action for interference with prospective economic
advantage, ELI and FRS alleged Defendants intentionally interfered with
Plaintiffs’ economic relationships with current and future customers. ELI
and FRS sought compensatory damages “in excess of $37,550,000” (emphasis
omitted); and injunctive relief and “other remedies” “[i]n the alternative.”
In their fourth cause of action for misappropriation of Trade Secrets,
Plaintiffs alleged Defendants improperly acquired, disclosed, and/or used
Plaintiffs’ Trade Secrets; that Defendants’ misappropriation was “willful and
malicious”; that they were damaged “in excess of $37,550,000” (emphasis
omitted); and that they also were entitled to injunctive relief and “other
remedies.”
VEC in its fifth cause of action asserted R. Hayward, Tabush, and
E. Alvarez separately breached their written confidentially agreements by
disclosing “proprietary information of Plaintiffs,” causing Plaintiffs to sustain
damages “in excess of $37,550,000” (emphasis omitted).
Finally, Plaintiffs alleged in their unfair competition cause of action
(Bus. & Prof. Code, § 17200 et seq.) (UCL) that Defendants engaged in unfair
competition and unlawful business practices as described in their other
causes of action. Plaintiffs sought injunctive relief, restitution of all monies,
and disgorgement of any profits made by Defendants.
6
B. Plaintiffs’ Case-in-chief
Jon Bennett, the president of FRS and VEC and former president of
ELI, testified VEC hired R. Hayward as a field technician in about 2008 and
subsequently promoted him to project manager. As project manager,
R. Hayward met with regulators and acted as a contact person for Plaintiffs’
current and future customers. R. Hayward worked for VEC until January 8,
2016.
On the last day of his employment, R. Hayward returned his company
truck, cell phone, and fuel card, and cleaned out his office. Bennett saw
R. Hayward in possession of a binder containing “[h]undreds of business
cards” of “customers and potential customers” of ELI and/or FRS. Written on
some of these cards was customer information including waste streams and
rates. Bennett occasionally had used these business cards to call customers
of ELI and/or FRS. Bennett took possession of the binder and another
manual, locked them inside R. Hayward’s former office, and drove
R. Hayward home.
Tabush worked as a field technician under R. Hayward’s supervision.
Bennett testified that a few days after R. Hayward left VEC, Tabush used a
“knife” to break into R. Hayward’s office and retrieve the binder, which he
then returned to R. Hayward, along with two of Plaintiffs’ manuals.
Tabush testified that he and other technicians who worked for VEC
were “trained” to use a “bread knife” to unlock the office door of R. Hayward,
where they stored “specialized equipment” used in the cleanup of hazardous
waste. Tabush estimated he used the bread knife “over a hundred times” to
unlock the door, including in the middle of the night when responding to an
emergency. Technicians referred to the knife as “Jimmy keys,” named for
7
another VEC employee. Tabush witnessed technicians using the knife to
gain entry into R. Hayward’s office in the presence of VEC administrators.
Tabush further testified that a few days after R. Hayward left VEC, he
asked Tabush to retrieve the binder and any other “personal items.” The
following day, Tabush went to work at about 5:00 a.m., his usual start time.
Using the bread knife, he unlocked R. Hayward’s office door and retrieved the
binder and two “manuals” with R. Hayward’s name printed on them. Tabush
placed these items in his truck and dropped them off at R. Hayward’s home
after work.
Bennett fired Tabush a few days later for breaking into R. Hayward’s
former office and taking the binder and two manuals. Tabush signed VEC’s
confidentiality agreement at the same time he was terminated.
VEC employee Jennifer Lynn Crompton testified she had worked in the
waste management business for 39 years. Her duties at VEC included
training, “compliance issues,” human resources, and maintaining and
updating ELI’s “standard operating procedure[s]” (SOPs).
Crompton was questioned about trial exhibit 12, a September 9, 2015 e-
mail from R. Hayward to M. Alvarez that included 21 of ELI’s SOPs.5 She
testified she spent more than 100 hours researching and writing these SOPs,
mostly in 2008 and 2009 when she first began working at VEC. She added
5 The SOPs Compton prepared for ELI were admitted into evidence.
Outside the presence of the jury, the court noted that “every single” one of
these documents had “an indication that they’re confidential because the
lawyers stamped ‘confidential’ ” on them during discovery; and that this
designation (actually, “Confidential -- Attorneys’ Eyes Only”) was “very
prejudicial” and “very confusing for the jury.” The record shows the court
admonished the jury to ignore the confidential stamp on these and other
documents; and requested the parties to meet and confer and “prepare an
appropriate stipulation” to resolve this issue.
8
companies in the waste management business have different SOPs, and
shared her belief that ELI’s SOPs were “proprietary.” Crompton confirmed
that none of the SOPs she prepared were used by FRS and/or VEC, and none
were copyrighted or trademarked.
Crompton estimated that “[e]asily” more than 75 percent of the
research she conducted to prepare the SOPs were from public sources,
including a Web site maintained by the Department of Toxic Substances
Control (DTSC).6 Crompton also used templates from a computer program
Plaintiffs had purchased for “[s]everal hundred dollars” to generate many of
ELI’s SOPs. She acknowledged that ELI sometimes included its SOPs in bids
to customers as evidence of ELI’s “health and safety program[s].”
Karen Rivera testified VEC hired her as office manager in 2007. Her
responsibilities included handling accounts payable and receivable, and
managing and negotiating vender pricing. Rivera estimated that beginning
in about 2014, the volume of business from about 20 or 30 ELI customer
accounts she managed “dropped tremendously,” with some of these customers
no longer doing any business with ELI. She further estimated ELI at the
time had a “couple hundred” customers; that she did not know why ELI was
experiencing a reduction in business from these 20 or 30 customers; that for
many other customer accounts she managed there was no drop off in
business; and that during this same time period ELI (and FRS) also obtained
new customers. Rivera believed ELI’s customer account information was
“confidential,” as it included the type of waste each generated and the
services needed.
6 The DTSC Web site also includes such information as a company’s
hazardous waste identification number, contact information, the waste
“actually generated” by the company, and where that waste is disposed of or
stored.
9
Rivera also negotiated vender prices for waste storage that, for one
reason or another, FRS could not handle. She believed these prices were
“[c]onfidential,” as they were based in part on the volume of waste ELI
shipped to a vendor. Rivera added that sometimes the prices ELI paid a
vendor took “weeks” or “months” to negotiate, and would remain in “effect
and under contract for up to three years.”
Rivera worked with R. Hayward for years. Beginning in 2015, she saw
him “carrying two cellphones,” which she found “unusual” because in the past
he had had only one cell phone and VEC issued phones to all of its employees.
She also observed R. Hayward would leave the room when his “personal” cell
phone rang; and that he would brag “about how much money he had,” while
before he would “always” talk about “money being tight.”
R. Hayward testified he signed a confidentiality agreement with VEC
on April 1, 2008, which governed that company’s “policies” and “recipes.”
While employed by VEC between 2008 and January 2016, he never received
any policies or “recipes” specific to this company.
R. Hayward admitted signing a partnership agreement with
Enviropros on or about August 28, 2015, although he claimed he was never
paid under that agreement. He also admitted working for Enviropros as an
“[o]utside consultant” while employed by VEC, testifying he did so because
M. Alvarez was a “friend” who needed help getting “situated.”
R. Hayward was questioned about myriad e-mails with potential
customers of Enviropros and/or M. Alvarez and others at Enviropros in fall
2015 and early January 2016. By way of example, on November 18, 2015,
R. Hayward wrote M. Alvarez regarding a bid to a potential customer of
Enviropros, stating: “Let’s not shortchange ourselves. Enviro Pros needs to
be profitable. Let’s go with $7,800 per day”; and adding, “ ‘This still keeps us
10
a thousand per day under the other bid.’ ” When asked at trial about this e-
mail, R. Hayward testified, “I don’t recall that. I don’t recall.” However,
M. Alvarez testified the “ ‘other bid’ ” referenced in this e-mail was by ELI.
As another example, R. Hayward on December 3, 2015, sent an e-mail
to Enviropros regarding a potential job in Los Angeles, asking that someone
from Enviropros drive to the jobsite and take photographs so that
R. Hayward could “prepare a quote on behalf of Enviro Pros.” He also wrote,
“If not, I can go there myself, but I would be in [an] ELI truck, which I would
rather not do.”
R. Hayward was questioned about exhibit 12, the September 9, 2015 e-
mail he sent to M. Alvarez that included 21 of ELI’s SOPs. In this e-mail,
R. Hayward wrote, “Here you go, doctor these up [and] put Enviropros
Label[s] on them, edit as necessary. They are ours now.” R. Hayward had no
recollection of this e-mail.
M. Alvarez testified he met R. Hayward while doing business with ELI.
They began discussing a possible business arrangement in February 2015,
and entered into the “partnership agreement” on August 28, 2015. Once the
agreement was signed, M. Alvarez expected R. Hayward would give VEC two
weeks’ notice and join Enviropros. Starting August 28, Enviropros paid
R. Hayward $2,500 a month for a few months, until it became clear that
R. Hayward intended to remain at VEC. Enviropros thereafter only paid
R. Hayward a “commission” for deals he brokered for the company.
M. Alvarez also was questioned about exhibit 12. He testified that
none of these attachments were designated as “ ‘trade secrets’ ” or
“ ‘confidential information’ ” of ELI; that, in any event, he never used any of
these documents; and that he already was in possession of many of them as a
11
result of his attendance at an ELI “ ‘HAZWOPER[7] training [course] around
2007.’ ” M. Alvarez paid for this course, during which he received a binder
containing some of the same documents attached to exhibit 12. ELI then had
placed no restrictions on what M. Alvarez could do with these sample SOPs,
and none were marked confidential. M. Alvarez believed all 21 of the SOPs
in exhibit 12 were available on the Internet.
E. Alvarez testified he began working in sales for VEC sometime in
2014, he voluntarily left the company on October 3, 2015, and thereafter he
worked in sales for a series of waste management companies until he started
his own business in 2018. Two days before he left VEC, E. Alvarez used his
ELI e-mail address to send what Plaintiffs claimed was their “customer” list
to his personal e-mail account. The seven-page list, marked as trial exhibit
114 and received into evidence, included a company name, and the name, e-
mail address, and telephone number of the company’s contact person.
E. Alvarez testified he began creating this list or “spreadsheet” in 2010,
years before he went to work for VEC. The list was a work-in-progress, as
E. Alvarez would supplement it including while employed by VEC.
E. Alvarez estimated the list was about three-quarters complete when he
started working for VEC in 2014; that the list was actually a compilation of
“companies” in the waste management business and not “customers” of ELI
and/or FRS; and that he compiled the list through his own “effort[s],”
including “cold[-]call[ing]” “compan[ies],” obtaining their contact information
7 The acronym “HAZWOPER” stands for “Hazardous Waste Operation
and Emergency Response Plan.”
12
through the “DTSC website,”8 and visiting these companies in-person, where
he sometimes met with company representatives and other times just took
their business cards. E. Alvarez believed the list belonged to him and not
Plaintiffs or any of his previous employers.
S. Alvarez testified she and her daughter Samantha Baez started a
waste management business in 2013 called Amber Solutions. The business
mostly assisted companies with obtaining EPA numbers, which were
required to keep track of hazardous waste, and also provided accounting
services. As time went on, the company also helped businesses with waste
disposal on a “very small scale.” By early 2016, Amber Solutions was
regularly communicating with Enviropros to do waste pickups for a few
customers.
S. Alvarez testified she used the DTSC Web site to obtain information
about a company and solicit business on behalf of Amber Solutions. She
added the Web site contained a great deal of information about a company
including its waste streams, and in some cases “pricing.”
C. Hayward testified she was the controller for HEC, a company her
husband R. Hayward started in March 2016 to consult on “hazardous waste
matters.” She admitted her husband acted as a consultant for Enviropros,
including while he was employed by VEC. C. Hayward recalled in December
2015 she may have accidently “shredded” a check Enviropros had sent her
husband, but otherwise could not recall seeing or receiving any other checks
from Enviropros for her husband’s consulting work.
8 Like other witnesses, E. Alvarez found the DTSC Web site to be an
important “public resource,” which contained substantially more company
information than his seven-page list.
13
C. The Nonsuit Motions
Toward the end of their case-in-chief, Plaintiffs called their damages
expert, Anthony Ghosn. As discussed post, during his testimony the trial
court excused the jury and conducted an Evidence Code section 402 hearing
to determine whether Ghosn’s opinions were admissible. As a result of that
hearing, the court excluded Ghosn’s opinions, finding he was qualified to
testify as an expert “about business valuation and financial matters”
generally, but not about Plaintiffs’ alleged damages in this case. Thereafter
the court heard and subsequently granted the four nonsuit motions of
Hayward, Tabush, E. Alvarez, and S. Alvarez on all causes of action.
II. DISCUSSION
Plaintiffs’ primary contention on appeal is that the trial court erred in
granting Defendants’ nonsuit motions, including without first allegedly
giving them the opportunity to reopen and submit additional evidence in
their case-in-chief. Before reaching these issues, however, we first must
decide whether the court erred in making various evidentiary rulings, as
Plaintiffs also contend, inasmuch as the exclusion or admission of such
evidence is a factor in determining whether nonsuit was proper.
A. Exclusion of Plaintiffs’ Waste Management Expert
Plaintiffs contend the trial court erred when it excluded their waste
management expert, Peter Jaramillo. We disagree.
1. Additional Background
The trial date in this case was continued from April 27, 2020, to June 1,
2021, due to the COVID-19 pandemic. On March 29, 2021, defense counsel e-
mailed Plaintiffs regarding possible deposition dates for Plaintiffs’ experts
and, on April 8 when Plaintiffs did not respond, set Jaramillo’s deposition for
May 7. Thereafter, deposition dates were scheduled for the defendants’
14
experts. In mid-April, Plaintiffs sought to postpone Jaramillo’s deposition,
noting counsel was unavailable on May 7.
Jaramillo’s deposition was taken off calendar on May 6, and the date of
May 17 was chosen, after the parties met and conferred and Plaintiffs
represented defendants could “ ‘plan on’ ” this date. However, after the
defendants served the May 17 deposition notice, Plaintiffs again sought to
postpone Jaramillo’s deposition, stating he was “traveling” and his deposition
would have to wait until the week of May 24.
Plaintiffs thereafter served an objection to the May 17 deposition notice
to certain categories of documents for production, but not as a result of
Jaramillo’s unavailability. The defendants convened the deposition on May
17 without Jaramillo or Plaintiffs appearing, or Plaintiffs producing any
documents responsive to the production requests.
2. Analysis
A trial court “shall exclude from evidence the expert opinion of any
witness” if a party has “unreasonably failed” to “[m]ake that expert available
for a deposition . . . .” (Code Civ. Proc., § 2034.300, subd. (d), italics added.)9
“We review the trial court’s reasonableness determination under section
2034.300 for abuse of discretion.” (Boston v. Penny Lane Centers, Inc. (2009)
170 Cal.App.4th 936, 950 (Boston).)
We conclude the trial court properly exercised its broad discretion in
excluding Jaramillo as an expert based on substantial evidence showing
Plaintiffs “unreasonably failed” to make him available for a deposition. (See
§ 2034.300, subd. (d); Boston, supra, 170 Cal.App.4th at p. 950; Howard v.
Owens Corning (1999) 72 Cal.App.4th 621, 630-631 [substantial evidence is
9 Unless otherwise indicated, all further statutory references are to the
Code of Civil Procedure.
15
that which is “of ‘ “ponderable legal significance,” ’ ‘ “reasonable in nature,
credible, and of solid value” ’ ”].) Indeed, waiting until a week before the
June 1, 2021 trial date to make him available in a case Plaintiffs filed in
2016, after Plaintiffs twice sought to postpone his deposition and the
parties—after meeting and conferring—had settled on the date of May 17,
amply supports the court’s unreasonableness finding. In further support, it
appears Plaintiffs never produced any documents responsive to the
production requests in the May 17 deposition notice.
Our Supreme Court has recognized that the need for pretrial discovery
is greater for expert witnesses than for ordinary fact witnesses because the
opponent must prepare to cope with the expert’s specialized knowledge.
(Bonds v. Roy (1999) 20 Cal.4th 140, 147.) Included in the detailed
procedures for discovery pertaining to experts is the provision allowing a
party to demand production of any discoverable reports and writings made by
an expert in the course of preparing his or her opinions. (§ 2034.210,
subd. (c).)10 “This allows the parties to assess whether to take the expert’s
deposition, to fully explore the relevant subject area at any such deposition,
and to select an expert who can respond with a competing opinion on that
subject area.” (Bonds, at pp. 146-147.) Waiting until the week before trial to
produce Jaramillo (and any of his “reports and writings”) undermines the
need for and importance of pretrial discovery of an expert witness. (See
§ 2034.300, subd. (c); Bonds, at p. 147.) We thus reject this claim of error.
10 “Any party may also include a demand for the mutual and
simultaneous production for inspection and copying of all discoverable reports
and writings, if any, made by any expert described in subdivision (b) in the
course of preparing that expert’s opinion.” (§ 2034.210, subd. (c).)
16
B. Exclusion of Plaintiffs’ Damages Expert’s Opinions
Plaintiffs contend the trial court also abused its discretion in excluding
the opinions of expert Anthony Ghosn. We again disagree.
1. Additional Background
Toward the end of their case-in-chief, Plaintiffs called Ghosn as their
only damages expert. He initially testified regarding his methodology to
calculate Plaintiffs’ damages in this case. His methodology did not “assign[ ]
any fault to anyone,” but instead used what he referred to as a “but for”
approach, “which means if not for the allegations here in this matter, these
quantifications would be the damages. [¶] So in other words, if the allegations
are true, we believe these are the losses, the appropriate losses, the profits,
related cash flows and related costs.” To calculate these “losses,” Ghosn
relied on “[t]hird-party independent reports on industry trends in the hazmat
and recycling and environmental consulting industries, financials from the
plaintiff[s’] companies, and projections from the plaintiff[s’] companies
through plaintiff[s’] CPA firm.” Ghosn then compared the industry trend and
Plaintiffs’ projected performance to Plaintiffs’ actual performance and, using
additional variables, found the difference to be Plaintiffs’ actual damages.
The record shows the trial court repeatedly sustained Defendants’
objections to Plaintiffs’ attempts to admit both Ghosn’s expert report11 and
his opinions concerning Plaintiffs’ damages. Plaintiffs then requested a
sidebar. The court instead excused the jury. It noted Plaintiffs had failed to
lay an adequate foundation for Ghosn’s opinions, explaining: “What I haven’t
heard from this witness is what he did to determine that the graph of the
11 In sustaining the objections to Ghosn’s report, the court commented the
report was hearsay and it was “unusual” for a party to seek admission of an
expert report.
17
industry, which wasn’t followed by the graph of [Plaintiffs’] performance[,]
was due to anything that the defendants did. That’s the foundation that I
don’t see.”
The trial court recognized there could be “any number of reasons” why
Plaintiffs’ performance fell below industry trends, noting this was the “post
hoc ergo propter hoc fallacy.” (See Western States Petroleum Assn. v. South
Coast Air Quality Management Dist. (2006) 136 Cal.App.4th 1012, 1020, fn.
17 [“The logical fallacy of post hoc ergo propter hoc assumes one event is the
cause of another merely because the first event precedes the other”].) The
court inquired whether Plaintiffs had another expert who could “tie” their
“financial losses to the defendant[s’] conduct.” Plaintiffs responded they had
“the facts” and Ghosn’s opinions, and that it was the “province of the jury” to
make the “factual connection” between Plaintiffs’ losses and Defendants’
conduct.
The trial court next gave as an example one possible method for
calculating damages. It explained that, if Plaintiffs proffered evidence of
“identifiable customers” who “went from the plaintiffs to any of the
defendants,” an expert then could quantify the “losses that flowed from the
loss of those customers”; and that it would then be up to the jury to
“accept . . . or reject” this evidence as damages. While Plaintiffs agreed there
needed to be a “nexus” between their losses and Defendants’ conduct, they
argued Ghosn provided this connection, albeit “on a more global level” than
the “customer-by-customer analysis” suggested by the court.
The trial court in response conducted an Evidence Code section 402
hearing. At its conclusion and after argument by counsel, it excluded Ghosn’s
opinions regarding Plaintiffs’ damages, finding they were based on industry
trends and the fact Plaintiffs “lost revenue relative to [their] own projections”
18
without a foundation that those losses were “tied” to anything Defendants
had done.
2. Guiding Principles
It is axiomatic that a plaintiff cannot recover damages from a
defendant unless the defendant’s conduct was the proximate cause of those
damages. (See Azcona v. Tibbs (1961) 190 Cal.App.2d 425, 428 [discussing
proximate cause in connection with a negligence cause of action].) Civil Code
section 3333 requires a causal connection between the tortious conduct of a
defendant and the resulting injury to a plaintiff: “For the breach of an
obligation not arising from contract, the measure of damages, except where
otherwise expressly provided by this Code, is the amount which will
compensate for all the detriment proximately caused thereby, whether it
could have been anticipated or not.” (Civ. Code, § 3333, italics added.) “The
necessary causal connection between the tortious conduct and the injury
must be shown, and in general the rules of legal or proximate cause that
determine liability also determine whether the defendant shall be liable for
particular items of injury or loss.” (6 Witkin, Summary of Cal. Law (11th ed.
2017) Torts, § 1721, p. 1115.)
“ ‘Ordinarily, proximate cause is a question of fact which cannot be
decided as a matter of law from the allegations of a complaint. . . .
Nevertheless, where the facts are such that the only reasonable conclusion is
an absence of causation, the question is one of law, not of fact.’ ” (State Dept.
of State Hospitals v. Superior Court (2015) 61 Cal.4th 339, 353.)
Under California law, “trial courts have a substantial ‘gatekeeping’
responsibility” in determining whether a matter relied on by an expert is
reliable so as to assist the trier of fact or is speculative, thus rendering the
expert’s opinion inadmissible. (Sargon Enterprises, Inc. v. University of
19
Southern California (2012) 55 Cal.4th 747, 769 (Sargon).) Evidence Code
section 801 provides in relevant part: “If a witness is testifying as an expert,
his [or her] testimony in the form of an opinion is limited to such an opinion
as is: [¶] (a) Related to a subject that is sufficiently beyond common
experience that the opinion of an expert would assist the trier of fact; and [¶]
(b) Based on matter . . . that is of a type that reasonably may be relied upon
by an expert in forming an opinion upon the subject to which his [or her]
testimony relates, unless an expert is precluded by law from using such
matter as a basis for his opinion.”
“ ‘An expert opinion has no value if its basis is unsound.’ ” (Sargon,
supra, 55 Cal.4th at p. 770.) Under Evidence Code section 801, subdivision
(b), the “ ‘matter relied on must provide a reasonable basis for the particular
opinion offered, and . . . an expert opinion based on speculation or conjecture
is inadmissible.’ ” (Sargon, at p. 770.) The trial court therefore “acts as a
gatekeeper” under Evidence Code section 801, subdivision (b) to exclude
speculative or irrelevant expert opinion. (Sargon, at p. 770.) “ ‘ “Exclusion of
expert opinions that rest on guess, surmise, or conjecture [citation] is an
inherent corollary to the foundational predicate for admission of the expert
testimony: will the testimony assist the trier of fact to evaluate the issues it
must decide?” ’ ” (Ibid.)
We apply an abuse of discretion standard in reviewing a trial court’s
ruling admitting or excluding expert testimony. (Sargon, supra, 55 Cal.4th
at p. 773.) “[E]videntiary objections based on lack of foundation, qualification
of experts, and conclusory and speculative testimony are traditionally left to
the sound discretion of the trial court.” (Alexander v. Scripps Memorial
Hospital La Jolla (2018) 23 Cal.App.5th 206, 226 (Alexander).) “A court
abuses its discretion if its ruling is ‘ “so irrational or arbitrary that no
20
reasonable person could agree with it.” ’ . . . ‘It is the appellant’s burden on
appeal to show the trial court abused its discretion.’ ” (Sanchez v. Kern
Emergency Medical Transportation Corp. (2017) 8 Cal.App.5th 146, 154
(Sanchez).)
3. Analysis
We conclude the trial court’s ruling to exclude Ghosn’s opinions was a
proper exercise of its discretion. (See Sanchez, supra, 8 Cal.App.5th at
p. 154.)
First, we note the trial court waited until after the Evidence Code
section 402 hearing to make its ruling. This allowed the parties ample
opportunity to question Ghosn regarding the basis for his opinions, and the
court to discern whether Plaintiffs had laid an adequate foundation for their
admission. (See Alexander, supra, 23 Cal.App.5th at p. 226.) It is clear from
the record the court took a careful and thoughtful approach in performing its
role as “gatekeeper” under Evidence Code section 801, subdivision (b),
ensuring the matter relied on by Ghosn provided a reasonable basis to assist
the jury in deciding whether Defendants’ alleged tortious conduct in fact
harmed Plaintiffs and if so in what amounts. (See Lueter v. State of
California (2002) 94 Cal.App.4th 1285, 1302-1303 (Lueter) [recognizing the
legal distinction between proving the fact of damages as opposed to proving
the amount of damage, and concluding “[t]o recover in tort, the plaintiff must
prove the fact of proximately caused injury with reasonable certainty” (italics
added)].)
Second, the record supports the trial court’s finding that Ghosn’s
damages analysis was based on “ ‘ “assumptions of fact without evidentiary
support.” ’ ” (See Sargon, supra, 55 Cal.4th at p. 770.) Indeed, Ghosn
testified his “but for” methodology in calculating damages was “probabilistic”
21
and based on the assumption that a “group of people” were “responsible for
[Plaintiffs] not getting what [they] expected.” However, under this
“approach” Ghosn did not analyze whether Defendants were that “group of
people,” including whether Defendants had taken any customers away from
ELI and/or FRS; whether Plaintiffs’ profits, as a result of Defendants’ tortious
conduct, had declined and if so in what amounts; or whether Defendants were
unjustly enriched at Plaintiffs’ expense. Instead, his approach was a
“forensic exercise” that used industry trends and Plaintiffs’ projections of
profits from their CPA to calculate purported losses based on Plaintiffs’
actual financial performance. (See California Shoppers, Inc. v. Royal Globe
Ins. Co. (1985) 175 Cal.App.3d 1, 62 [“Damages which are remote, contingent,
or merely possible cannot serve as a legal basis for recovery” (italics added)].)
As the trial court reiterated on multiple occasions in refusing to admit
Ghosn’s opinions, there could be any number of reasons why Plaintiffs’ profits
decreased. We agree with the court that the matter on which Ghosn relied to
show with “reasonable certainty” the “fact of proximately caused injury” to
Plaintiffs was speculative, rendering his opinions inadmissible. (See Lueter,
supra, 94 Cal.App.4th at pp. 1302-1303 [“[W]here the fact of proximately
caused injury is not proven with reasonable certainty, the plaintiff cannot
recover regardless of how much evidence was introduced to show the measure
of the recovery sought by the plaintiff” (italics added)]; see also Sargon,
supra, 55 Cal.4th at p. 770; accord, Kaney v. Custance (2022) 74 Cal.App.5th
201, 212 [noting causation must be established by “nonspeculative evidence”
and may be decided as a question of law if “ ‘ “there is no room for a
reasonable difference of opinion” ’ ”].) We thus conclude the court, in its role
as “gatekeeper,” properly excluded Ghosn’s opinions.
22
C. Exclusion of Documents
Plaintiffs next contend the trial court erred in first ruling to admit,
then later revisiting its decision and deciding to exclude, documents attached
to three e-mails between R. Hayward and M. Alvarez in September 2015. We
disagree.
1. Additional Background
During the testimony of M. Alvarez, the trial court overruled
Defendants’ foundation objection to the admission of exhibit 12, which as
noted included 21 of ELI’s SOPs as attachments. During this same testimony
the court admitted without objection exhibit 13, an e-mail R. Hayward sent
M. Alvarez on September 9, 2015 that included VEC’s 74-page “Alcohol and
Controlled Substances Policy”; and exhibit 15, a September 11, 2015 e-mail
M. Alvarez sent R. Hayward that included five ELI documents M. Alvarez
had reworked for use by Enviropros.
Tabush subsequently filed a motion asking the trial court to reconsider
its admission of the attachments to exhibits 12, 13, and 15, arguing that
M. Alvarez had not authenticated any of the documents, which collectively
numbered hundreds of pages. Tabush noted that, while M. Alvarez
authenticated the e-mails themselves, he had spent just a few “seconds” on
the witness stand reviewing the attachments; and thus, had not verified that
they were the same as the ones he had received or sent electronically in the e-
mails with R. Hayward.
The record shows the trial court and the parties mistakenly believed
Defendants had also objected to the admission of the attachments in exhibits
13 and 15. The court agreed with Tabush that M. Alvarez had spent “only a
few seconds” reviewing the attachments and that it had become clear on
cross-examination he “really wasn’t at all sure that those were the documents
23
that were received” electronically. The court noted the jury had not yet
reviewed any of the attachments, and some of the documents in exhibit 12
had already been admitted during Crompton’s testimony. After additional
argument, it excluded the remaining attachments to exhibits 12, 13, and 15
for lack of foundation, but not the three e-mails themselves.
2. Guiding Principles and Analysis
“Evidence that lacks foundation is inadmissible, and a court abuses its
discretion when it admits it.” (Valentine v. Plum Healthcare Group, LLC
(2019) 37 Cal.App.5th 1076, 1090 (Valentine).) Exhibits 12, 13, and 15 were
“writings” (Evid. Code, § 250)12 that could not be admitted without a proper
foundation (id., § 1401, subd. (a)).13 To authenticate a writing, its proponent
must introduce “evidence sufficient to sustain a finding that it is the writing
that the proponent of the evidence claims it is.” (Id., § 1400.)
Here, the record shows M. Alvarez took “only a few seconds” to review
the hundreds of pages collectively attached to exhibits 12, 13, and 15, and
later admitted on cross-examination he could not be sure that the documents
attached to these exhibits were the same ones that had been included in the
September 2015 e-mails he exchanged with R. Hayward. The trial court thus
properly exercised its discretion when it found there was no foundation for
12 “ ‘Writing’ means handwriting, typewriting, printing, photostating,
photographing, photocopying, transmitting by electronic mail or facsimile,
and every other means of recording upon any tangible thing, any form of
communication or representation, including letters, words, pictures, sounds,
or symbols, or combinations thereof, and any record thereby created,
regardless of the manner in which the record has been stored.” (Evid. Code,
§ 250.)
13 “Authentication of a writing is required before it may be received in
evidence.” (Evid. Code, § 1401, subd. (a).)
24
the admission of the attachments, other than those previously received
during Crompton’s testimony. (See Evid. Code, § 1401, subd. (a); Valentine,
supra, 37 Cal.App.5th at p. 1090.)
Plaintiffs nonetheless contend the trial court erred because there was
“affirmative testimony” provided by M. Alvarez “that the later-stricken
emails” were authentic. (Italics added.) However, as noted the court did not
exclude the e-mails themselves, including exhibit 12 in which R. Hayward
suggested M. Alvarez “doctor up” the attachments and put “Enviropros
Label[s] on them.”
In any event, we note the court made its ruling without prejudice to
allow Plaintiffs to lay a proper foundation for admission of the remaining
attachments. However, it does not appear that Plaintiffs ever recalled
M. Alvarez or another witness to lay this foundation. For this additional
reason we reject this claim of error.
D. Nonsuit
Reaching the overarching issue in this case, Plaintiffs raise a series of
contentions in support of their claim that the trial court erred in granting
Defendants’ nonsuit motions on all causes of action.
1. Guiding Principles
“A trial court may grant a motion for nonsuit if the plaintiff’s evidence
would not support a jury verdict in the plaintiff’s favor.” (Crouch v. Trinity
Christian Center of Santa Ana, Inc. (2019) 39 Cal.App.5th 995, 1013.) We
review de novo an order granting nonsuit, applying the same standard as
used by the trial court. (Nally, supra, 47 Cal.3d at p. 291.)
“A defendant is entitled to a nonsuit if the trial court determines that,
as a matter of law, the evidence presented by plaintiff is insufficient to
permit a jury to find in [the plaintiff’s] favor.” (Nally, supra, 47 Cal.3d at
25
p. 291.) Evidence is legally insufficient when no substantial evidence exists
tending to prove each element of the plaintiff’s claim or claims. (Joyce v. Ford
Motor Co. (2011) 198 Cal.App.4th 1478, 1488 (Joyce).) “A mere ‘scintilla of
evidence’ does not create a conflict for the jury’s resolution; ‘there must be
substantial evidence to create the necessary conflict.’ ” (Nally, at p. 291.)
In determining whether the plaintiff’s evidence is sufficient, the court
may not weigh the evidence or consider witness credibility, but must accept
as true the evidence most favorable to the plaintiff and disregard conflicting
evidence. (Nally, supra, 47 Cal.3d at p. 291.) The court must interpret the
evidence most favorably to the plaintiff and draw every reasonable inference,
and resolve all presumptions, conflicts, and doubts, in the plaintiff’s favor.
(Ibid.; accord, Castaneda v. Olsher (2007) 41 Cal.4th 1205, 1214.)
A nonsuit may be affirmed on any ground specified in the motion,
whether or not the trial court granted the motion on that ground. (Lawless v.
Calaway (1944) 24 Cal.2d 81, 92-94; Saunders v. Taylor (1996)
42 Cal.App.4th 1538, 1542.) A nonsuit also may be affirmed on an
unspecified ground only if it is clear the defect is one which could not have
been remedied had the motion called the defect to the plaintiff’s attention.
(Wilson v. Century 21 Great Western Realty (1993) 15 Cal.App.4th 298, 305-
306.)
2. Fact of Injury and Resulting Damages
As we have found, the trial court properly excluded the opinions of
Ghosn, Plaintiffs’ only damages expert, as a result of his reliance on
speculative and conjectural matter that failed to connect the alleged tortious
conduct of Defendants to the fact of damage allegedly suffered by Plaintiffs.14
14 As noted, the court also excluded Jaramillo, Plaintiffs’ waste
management expert. Plaintiffs on appeal contend Jaramillo’s exclusion was
26
(See Lueter, supra, 94 Cal.App.4th at pp. 1302-1303.) The question next
becomes whether, without Ghosn’s opinions, nonsuit was proper on Plaintiffs’
tort-based and breach of contract causes of action. The answer is yes.
a. Other Witness Testimony
As noted, Rivera managed some of ELI’s customer accounts. In about
2014, she noticed business from about 20 or 30 of these accounts “dropped
tremendously,” and that some of these customers stopped doing business
with ELI altogether. In 2015, she observed R. Hayward carrying two
cellphones, and noticed he would leave the room when his personal cell phone
rang. He also no longer talked about money being “tight.”
Viewing, as we must, this evidence in the light most favorable to
Plaintiffs (see Nally, supra, 47 Cal.3d at p. 291), we conclude Rivera’s
testimony is legally insufficient to support a finding that ELI suffered harm
caused by Defendants. (Ibid.; Joyce, supra, 198 Cal.App.4th at p. 1488.)
Neither Rivera nor any other witness called by Plaintiffs, including Bennett,
the president of FRS and VEC and former president of ELI, connected
R. Hayward’s conduct, or the conduct of the remaining Defendants, to the
decrease in ELI’s business during this time frame.15 Nor did any of these
prejudicial because his testimony about the “value” of Plaintiffs’ “operating
procedures” allegedly “would have directly addressed” the issues raised by
the court when it granted Defendants’ nonsuit motions. But there is nothing
in the record to support this contention, including, by way of example only,
Jaramillo’s “reports and writings” (see § 2034.300, subd. (c)) and/or an offer of
proof describing his purported valuation testimony. Plaintiffs thus have
failed to show his exclusion from evidence, even if error, was prejudicial. (See
Cassim v. Allstate Ins. Co. (2004) 33 Cal.4th 780, 800 [error justifies reversal
in a civil action only if it is reasonably probable a different result would have
been reached absent the error].)
15 We note Rivera’s testimony regarding a drop off in business and
“change[s]” in customer relationships was limited to ELI.
27
20 or 30 customers testify they used to do business with ELI but, due to
Defendants’ conduct (and R. Hayward’s in particular), moved to a competitor
(i.e., Enviropros). In addition, Rivera testified that for many other customers
of ELI there was no drop off in business, and that ELI (and FRS) also added
customers during this same time frame.
Even clearing this legal hurdle, Plaintiffs also offered no evidence that
a “reasonable basis” was used to compute ELI’s purported damages, including
lost revenues and/or profits, as a result of this drop off in customer accounts
managed by Rivera. (See GHK Associates v. Mayer Group, Inc. (1990)
224 Cal.App.3d 856, 873 (GHK) [noting when the “fact of damages is certain,”
the “law requires only that some reasonable basis of computation of damages
be used”].)
Plaintiffs, however, contend that the trial court erred in granting
nonsuit because “juries are empowered to quantify damages[ ] even when a
plaintiff’s case in chief does not provide a specific quantification.” In support,
Plaintiffs further contend the court had a “fundamental misunderstanding” of
the law by allegedly requiring them to “quantify damages to the dollar” on
“each cause of action” to avoid a nonsuit.
Plaintiffs have the proverbial cart before the horse. Before Plaintiffs
could recover damages, they first had to establish (by substantial evidence)
that they suffered harm caused by Defendants. (See Lueter, supra,
94 Cal.App.4th at pp. 1302-1303; GHK, supra, 224 Cal.App.3d at p. 873.)
Where the “fact of proximately caused injury is not proven with reasonable
certainty, the plaintiff cannot recover regardless of how much was introduced
to show the measure of the recovery sought by the plaintiff.” (Lueter, at
p. 1303, italics added.)
28
Plaintiffs have failed to offer substantial evidence to show the fact of
damage caused by Defendants. (See Nally, supra, 47 Cal.3d at p. 291; Joyce,
supra, 198 Cal.App.4th at p. 1488.) We thus reject their two-sentence
argument (in their 72-page brief) that this showing was “amply established.”
Nor did the trial court make such a finding, as they also argue, when they
claim the court “admitted” Plaintiffs had “ ‘shown inferentially’ ” they had
“lost business.”16
b. Nominal Damages
Plaintiffs also contend the trial court erred in granting a nonsuit
because it “ignored the possibility of nominal damages.” “Nominal damages”
describes a claim where there are no actual damages, but the law
nevertheless recognizes a technical invasion of a right or duty. (Civ. Code,
§ 3360.)17 “Nominal damages are usually awarded where there is an
invasion of a legally protected interest that does not result in actual damage.
The invasion is ‘injury without damage,’ and an award of damages is not the
object of the action, which is brought to vindicate the right or interest. The
16 Our review of the record shows the court made this statement when
discussing Rivera’s testimony about ELI’s purported loss of business and
revenues over a certain time period, noting a plaintiff could rely on inferences
-- when supported by facts -- that such losses were caused by the acts of a
defendant. What Plaintiffs neglect to mention is that the court went on to
state that Rivera’s testimony “wasn’t tied in any manner to any action by the
defendants”; that “there’s no nexus between the alleged injury suffered by
Plaintiff[s] and what the defendants did, and nothing is quantified to any
extent”; and that the “vague testimony of, [‘]well, business declined during
those years[,’] ” was insufficient because there “could be any number of
reasons that business declined.”
17 “When a breach of duty has caused no appreciable detriment to the
party affected, he [or she] may yet recover nominal damages.” (Civ. Code,
§ 3360.)
29
interest is recognized and protected by the award of nominal damages,
together with costs.” (6 Witkin, Summary of Cal. Law, supra, Torts, § 1713,
p. 1104.)
We conclude Plaintiffs were not entitled to an award of nominal
damages in this case. First, in a tort action “ ‘nominal damages to vindicate a
technical right cannot be recovered . . . where no actual loss has occurred,’ ”
such as when a plaintiff’s evidence of “prospective profits was too speculative
to form a basis of permissible recovery.” (See Engle v. City of Oroville (1965)
238 Cal.App.2d 266, 274.) As we have noted, Plaintiffs have failed to proffer
substantial evidence to show they suffered harm based on the acts of
Defendants, and to quantify their resulting damages, if any, on
nonspeculative grounds.
Second, nominal damages were not the “object of [Plaintiffs’] action” in
this case, as they sought compensatory damages on all causes of action other
than their UCL claim, where damages are not recoverable. (See Korea
Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1144 (Korea
Supply) [“A UCL action is equitable in nature; damages cannot be
recovered”]; 6 Witkin, Summary of Cal. Law, supra, Torts, § 1713, p. 1104.)
Indeed, Plaintiffs sought damages in excess of $260,000 and $282,400
on their first and second causes of action for conversion and trespass to
chattels, respectively. And they sought damages in excess of $37.55 million
on their causes of action for interference with prospective economic
advantage, misappropriation of Trade Secrets, and breach of contract. Thus,
in bringing this action Plaintiffs were not seeking to protect a property right
or vindicate some other interest where an award of nominal damages would
have been appropriate. (See Civ. Code, § 3360.) There was no error in
refusing to award Plaintiffs nominal damages.
30
3. Conversion and Trespass to Chattels
Plaintiffs contend they presented “more than enough evidence” to
support each element of their conversion and related trespass to chattels
causes of action. We disagree.
A common element of both causes of action is the necessity of actual
damages. (See, e.g., Voris v. Lampert (2019) 7 Cal.5th 1141, 1150-1151
(Voris) [among other essential elements conversion requires resulting
damages]; Greka Integrated, Inc. v. Lowrey (2005) 133 Cal.App.4th 1572,
1581 [“ ‘ “The elements of a conversion are the plaintiff’s ownership or right
to possession of the property at the time of the conversion; the defendant’s
conversion by a wrongful act or disposition of property rights; and
damages” ’ ” (italics added)]; Intel Corp. v. Hamidi (2003) 30 Cal.4th 1342,
1351 (Intel) [“In modern American law generally, ‘[t]respass [to chattels]
remains as an occasional remedy for minor interferences, resulting in some
damage, but not sufficiently serious or sufficiently important to amount to
the greater tort’ of conversion”]; Zaslow v. Kroenert (1946) 29 Cal.2d 541, 551
(Zaslow) [“Where the conduct complained of . . . consists of intermeddling
with or use of or damages to the personal property, the owner has a cause of
action for trespass . . . and may recover only the actual damages suffered by
reason of the impairment of the property or the loss of its use” (italics
added)].)
Here, we conclude nonsuit was proper because Plaintiffs failed to
present any evidence, much less substantial evidence (see Nally, supra,
47 Cal.3d at p. 291; Joyce, supra, 198 Cal.App.4th at p. 1488), of “actual”
damages to support either cause of action.
31
For conversion, Plaintiffs contend R. Hayward took their SOPs and
shared them with HEC and his wife C. Hayward.18 They also contend
R. Hayward “used an ELI truck while working for a competitor.” There is no
evidence, however, of “ ‘resulting damages’ ” based on Hayward’s alleged
wrongful exercise of dominion over this personal property. (See Voris, supra,7 Cal.5th at pp. 1150-1151; Intel, supra, 30 Cal.4th at p. 1351; Zaslow, supra,
29 Cal.2d at p. 551.) Nor is there any evidence of the “time and money”
Plaintiffs expended “in pursuit” of such property. (See Civ. Code, § 3336.)19
Plaintiffs also contend that E. Alvarez converted their seven-page
“customer” list (i.e., exhibit 114) by e-mailing it to himself a few days before
he voluntarily left VEC. Again, however, there is no evidence Plaintiffs
suffered damages as a result of E. Alvarez’s alleged20 conversion of this list,
18 It is not altogether clear how, based on this evidence, HEC and/or
C. Hayward would be liable for conversion based on their mere receipt of the
SOPs from R. Hayward. (See Multani v. Knight (2018) 23 Cal.App.5th 837,
853 [noting the “ ‘act [constituting conversion] must be knowingly or
intentionally done’ ”].) Similarly, the only evidence of conversion by
S. Alvarez appears to be her receipt of nine FRS hazardous waste “profile”
sheets that E. Alvarez e-mailed her and others on January 6, 2016. (See id.
at p. 853.)
19 “The detriment caused by the wrongful conversion of personal property
is presumed to be: [¶] First—The value of the property at the time of the
conversion, with the interest from that time, or, an amount sufficient to
indemnify the party injured for the loss which is the natural, reasonable and
proximate result of the wrongful act complained of and which a proper degree
of prudence on his part would not have averted; and [¶] Second—A fair
compensation for the time and money properly expended in pursuit of the
property.” (Civ. Code, § 3336.)
20 Although we view the evidence in the light most favorable to Plaintiffs
in determining whether a nonsuit was proper (see Nally, supra, 47 Cal.3d at
p. 291), from our own review of the record there appears to be insufficient
32
or evidence of the “time and money” they expended “in pursuit” of such
property. (See Civ. Code, § 3336.)
We reach the same conclusion for Tabush, who, at R. Hayward’s
request, used a bread knife to unlock R. Hayward’s office door and retrieve
the binder containing hundreds of business cards and two manuals with
R. Hayward’s name on their covers. Despite Plaintiffs’ contention otherwise,
nonsuit was proper because they offered no evidence of resulting damages
from Tabush’s taking of these three items, including their value at the time of
conversion. (See Civ. Code, § 3336.)
Plaintiffs also contend nonsuit was improper on their trespass to
chattels cause of action based on evidence R. Hayward allegedly damaged a
gas meter. However as the trial court correctly noted, Plaintiffs offered no
evidence of the cost to replace or fix this particular item or damages for its
loss of its use. (See Intel, supra, 30 Cal.4th at p. 1351; Zaslow, supra,
29 Cal.2d at p. 551.) Nor did the trial court find evidence of injury or damage
resulting from the “impairment” of other personal property, including the
binder full of business cards. Regarding this latter item, which was a focus of
Plaintiffs, the court remarked: “Was there a damage to that? What about
loss of use of that? I don’t have any evidence about that.” We conclude
nonsuit was also properly granted on the trespass to chattels cause of action.
evidence that Plaintiffs owned the “customer” list or had the right to its
possession. (See Voris, supra, 7 Cal.5th at p. 1150 [besides resulting
damages, an essential element of conversion is a plaintiff’s “ ‘ownership or
right to possession of personal property’ ”].) The evidence is uncontradicted
E. Alvarez began compiling the list in 2010, and the list was about three-
quarters completed when he joined VEC in 2014.
33
4. Intentional Interference with Prospective Economic
Advantage
A plaintiff asserting this tort cause of action must plead the following
elements: “ ‘ “(1) an economic relationship between the plaintiff and some
third party, with the probability of future economic benefit to the plaintiff;
(2) the defendant’s knowledge of the relationship; (3) intentional acts on the
part of the defendant designed to disrupt the relationship; (4) actual
disruption of the relationship; and (5) economic harm to the plaintiff
proximately caused by the acts of the defendant.” ’ ” (Korea Supply, supra,
29 Cal.4th at p. 1153, italics added.)
We conclude nonsuit on this cause of action was proper for lack of
substantial evidence that Plaintiffs suffered injury caused by the acts of
Defendants. (See Korea Supply, supra, 29 Cal.4th at p. 1153; Lueter, supra,
94 Cal.App.4th at pp. 1302-1303; GHK, supra, 224 Cal.App.3d at p. 873.)
We separately conclude nonsuit was also proper for lack of substantial
evidence that Defendants’ acts caused an “ ‘ “actual disruption” ’ ” of
Plaintiffs’ customer relationships. (See Korea Supply, supra, 29 Cal.4th at
p. 1153.) Plaintiffs once again point to Rivera’s testimony that beginning in
about 2014, ELI (but not FRS) experienced a “tremendous[ ]” drop off in
business from about 20 or 30 accounts she managed. But even viewed in the
light most favorable to Plaintiffs (see Nally, supra, 47 Cal.3d at p. 291), this
evidence does not support a reasonable inference that HEC,21 C. Hayward,
E. Alvarez, S. Alvarez, or even R. Hayward were individually or collectively
responsible for this decline in business.
21 HEC did not come into existence until about March 2016, after
R. Hayward had left VEC.
34
5. Misappropriation of Trade Secrets
As summarized ante and as set forth in their opening brief, Plaintiffs
contend they produced evidence of “three types of trade secrets: customer
information (including names, preferences, and contact information),
standard operating procedures, and vendor pricing.”
A prima facie claim of misappropriation of trade secrets has three
elements: “(1) the plaintiff owned a trade secret, (2) the defendant acquired,
disclosed, or used the plaintiff’s trade secret through improper means, and
(3) the defendant’s actions damaged the plaintiff.”22 (Sargent Fletcher, Inc.
v. Able Corp. (2003) 110 Cal.App.4th 1658, 1665 (Sargent Fletcher), italics
added.)
As is the case with Plaintiffs’ other tort-based causes of action, we
conclude nonsuit was properly granted on their misappropriation cause of
action based on the lack of substantial evidence that Defendants’ “actions
damaged” them. (See Sargent Fletcher, supra, 110 Cal.App.4th at p. 1665;
see also Nally, supra, 47 Cal.3d at p. 291; Joyce, supra, 198 Cal.App.4th at
p. 1488.)
Nonsuit was also proper because there was insufficient evidence
Plaintiffs’ customer information, SOPs, and vender pricing were a trade
22 Civil Code section 3426.2, subdivision (a) permits a court to enjoin
“actual or threatened” misappropriation of trade secrets, as well as to award
damages for such misappropriation as provided under Civil Code section
3426.3, subdivision (a). Although Plaintiffs in their misappropriation cause
of action included injunctive relief as an alternative to their request for
$37.55 million in damages, it does not appear they sought equitable relief in
the trial court, at least during their case-in-chief; nor do they argue on appeal
the court erred by failing to grant such relief. We thus conclude Plaintiffs
have forfeited any claim of error based on this issue. (See Telish v. State
Personnel Bd. (2015) 234 Cal.App.4th 1479, 1487, fn. 4 [an appellant’s failure
to raise an argument in the opening brief forfeits the issue on appeal.)
35
secret. To be a trade secret information must “[d]erive[ ] independent
economic value, actual or potential, from not being generally known to the
public or to other persons who can obtain economic value from its disclosure
or use.” (Civ. Code, § 3426.1, subd. (d)(1).)
Plaintiffs’ customer information was not secret. As we have noted,
ELI’s list of “customers” (i.e., exhibit 114) was actually a list of companies
E. Alvarez began compiling years before he joined VEC. The list merely set
forth the names and basic contact information of companies in the waste
management business. Plaintiffs’ customers also were generally known to
others including through the DTSC Web site.
The FRS “profile” sheets E. Alvarez sent to S. Alvarez and others also
were not secret. Our independent review of the profile sheets show they were
a form used by FRS containing the name of a single waste generator, the type
and quantity of waste stored and/or disposed of by FRS, the date of disposal,
and other basic information. As for the binder containing hundreds of
business cards that Tabush returned to R. Hayward, Plaintiffs did not show
it included secret information of ELI and/or FRS.
Nor did ELI keep its SOPs secret. M. Alvarez obtained some of the
same SOPs attached to exhibit 12 directly from ELI in 2007, when he paid for
and attended the “HAZWOPER” training course offered by ELI. ELI then
placed no restrictions on what M. Alvarez could do with these SOPs. In
addition, Crompton admitted that ELI sometimes gave customers its SOPs
when bidding for jobs, without any corresponding evidence such bids were
confidential and/or disclosure of the SOPs was prohibited.
Regarding vendor pricing, ELI entered into contracts with third parties
to dispose of hazardous waste that FRS could not handle. There is no
evidence these contracts were kept secret; that the third parties were
36
required to keep this pricing information secret; or the efforts ELI made, if
any, to keep these prices and contracts secret.
We therefore separately conclude Plaintiffs’ customer information and
ELI’s SOPs and vendor pricing were not trade secrets, as they derived no
“independent economic value” as a result of being generally unknown to the
public. (See Civ. Code, § 3426.1, subd. (d)(1); see also Altavion, Inc. v. Konica
Minolta Systems Laboratory, Inc. (2014) 226 Cal.App.4th 26,
62 [“ ‘Information that is readily ascertainable by a business competitor
derives no independent value from not being generally known’ ”].) Nonsuit
was thus properly granted on this cause of action.
6. Breach of Contract
VEC asserted this cause of action against former employees
R. Hayward, Tabush, and E. Alvarez, based on these defendants’ execution of
a confidentiality agreement with this company.
The “elements of a cause of action for breach of contract are (1) the
existence of the contract, (2) plaintiff’s performance or excuse for
nonperformance, (3) defendant’s breach, and (4) the resulting damages to the
plaintiff.” (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821
(Goldman), italics added.)
As is the case with Plaintiffs’ tort-based causes of action, nonsuit on
VEC’s breach of contract cause of action was proper for lack of substantial
evidence that VEC suffered any harm and damages proximately caused by
the acts of Defendants. (See Goldman, supra, 51 Cal.4th at p. 821; see also
Nally, supra, 47 Cal.3d at p. 291; Joyce, supra, 198 Cal.App.4th at p. 1488.)
Plaintiffs, however, contend there was sufficient evidence of harm
based on the “comprehensive disclosure of Plaintiffs’ information,” which they
contend “dovetailed with the loss of revenue from a large number of
37
customers.” But as we repeatedly have noted, there is no substantial
evidence that anything Defendants did caused Plaintiffs to lose revenue.
While we recognize substantial evidence may arise from inferences, such
inferences must be “ ‘a product of logic and reason’ and ‘must rest on the
evidence’ [citation]; inferences that are the result of mere speculation or
conjecture cannot support a finding [citations].” (Kuhn v. Department of
General Services (1994) 22 Cal.App.4th 1627, 1632-1633.)
Moreover, nonsuit was proper because there is no evidence these
defendants disclosed VEC’s alleged confidential information, as opposed to
the information of noncontracting parties ELI and/or FRS. “[T]he real party
in interest is the party who has title to the cause of action, i.e., the one who
has the right to maintain the cause of action.” (Vaughn v. Dame Construction
Co. (1990) 223 Cal.App.3d 144, 147.) A real party in interest “is the owner of
the cause of action” (id. at p. 148) and “[s]omeone who is not a party to [a]
contract has no standing to enforce the contract or to recover extra-contract
damages for wrongful withholding of benefits to the contracting party”
(Hatchwell v. Blue Shield of California (1988) 198 Cal.App.3d 1027, 1034).
Our independent review of the one-page confidentiality agreements
signed by R. Hayward and Tabush23 confirm the agreements were limited to
VEC’s “Confidential Information,” and that the rights and remedies set forth
in the agreements related to the harm VEC, and not ELI and/or FRS,
suffered from such disclosure. For this reason, we reject Plaintiffs’ contention
that the disclosure of ELI’s customer information, SOPs, and vendor pricing
supported VEC’s breach of contract cause of action.
23 The confidentiality agreement signed by E. Alvarez does not appear to
have been included in the record.
38
But that’s not all. The record shows Tabush signed his confidentiality
agreement on the same day he was terminated by VEC. Tabush therefore
could not have breached an agreement that was not yet in existence,
including when he used the bread knife to unlock R. Hayward’s door.
For all these reasons, we conclude nonsuit was proper on VEC’s breach
of contract cause of action.
7. The UCL Claim
Plaintiffs’ UCL claim was premised on a violation of the “statutes” and
the “wrongful acts” of Defendants, as alleged in their first through fifth
causes of action in the FAC. The UCL prohibits any “unlawful, unfair or
fraudulent business act or practice.” (Bus. & Prof. Code, § 17200.) The UCL
is a “law enforcement tool designed to protect customers and deter and
punish wrongdoing.” (People ex rel. Harris v. Aguayo (2017) 11 Cal.App.5th
1150, 1159.)
Business and Professions Code section 17200 “borrows” violations of
other laws and treats them as unlawful practices, which the UCL makes
independently actionable. (Cel-Tech Communications, Inc. v. Los Angeles
Cellular Telephone Co. (1999) 20 Cal.4th 163, 180.) “ ‘Virtually any law—
federal, state or local—can serve as a predicate for a [UCL] action.’ ”
(Aleksick v. 7-Eleven, Inc. (2012) 205 Cal.App.4th 1176, 1185.)
Under the UCL’s unlawful prong, courts have held that, if the
underlying statutory or tort claim upon which the UCL claim is predicated is
deemed invalid, the UCL claim also fails, as it “stand[s] or fall[s] depending
on the fate of the antecedent substantive causes of action.” (Krantz v. BT
Visual Images (2001) 89 Cal.App.4th 164, 178 (Krantz); accord, AMN
Healthcare, Inc. v. Aya Healthcare Services, Inc. (2018) 28 Cal.App.5th 923,
950 [“when the underlying legal claim fails, so too will a derivative UCL
39
claim”].) Courts have reached the same conclusion for an unfair practice.
(See Becerra v. McClatchy Co. (2021) 69 Cal.App.5th 913, 951 (Becerra)
[where an unfair business practices claim “is derivative of an underlying
violation of law, it must stand or fall with the underlying claim”].)
Plaintiffs base their UCL claim on their underlying causes of action
and Defendants’ alleged improper use of ELI’s “customer information, vendor
pricing, and standard operating procedures.” Because Plaintiffs’ underlying
causes of action each fail as a matter of law, and the evidence is insufficient
to support a finding that Plaintiffs were harmed by Defendants’ purported
use of ELI’s information, Plaintiffs’ UCL claim also must fail. (See Krantz,
supra, 89 Cal.App.4th at p. 178; Becerra, supra, 69 Cal.App.5th at p. 951.)
The trial court therefore properly granted nonsuit on Plaintiffs’ UCL claim.
8. Reopening of Plaintiffs’ Case-in-chief
Plaintiffs contend that, even if nonsuit was proper as to all causes of
action, the trial court erred by refusing to allow them to reopen their case-in-
chief and submit additional evidence to remedy the evidentiary deficiencies.
We disagree.
a. Additional Background
The record shows after the filing of Defendants’ nonsuit motions, the
trial court took a recess to review the motions. After lunch, the court
addressed the various grounds in support of its tentative to grant the motions
on each cause of action. The court found “[t]here [were] a number of
deficiencies” in Plaintiffs’ case and that the “overarching problem [was] the
absence of any [evidence of] damages” caused by the acts of Defendants.
Plaintiffs then attempted to respond point-by-point to the trial court’s
comments. In so doing, they went through a summary of the evidence, then
addressed reopening, arguing: “The specific offer of proof that we can provide
40
is -- well, given what we’ve discussed so far is one -- among Hayward’s
exhibits are invoices showing his income from customers that are identified
in his e-mails as customers that he was discussing while he was working with
ELI. [¶] So we can certainly bring up Robert Hayward to identify that.
Again, I don’t think it’s necessary. I think there’s plenty of grounds to deny
the motion for nonsuit[.]” Plaintiffs continued that, if the trial court’s “goal”
was to connect their damages with the acts of Defendants, there were “plenty
of inferences” to make that showing, and that R. Hayward also “would be able
to do that[.]”
Plaintiffs then addressed the evidence of the binder full of business
cards, and the two manuals Tabush took from R. Hayward’s office. The trial
court noted the “source document[s]” for the manuals was “digital” and still
in ELI’s possession, and the only thing taken by Tabush was a “printout of
those source documents[.]” The court then asked, even if there was testimony
the manuals belonged to Plaintiffs, what were they worth? Plaintiffs
responded that showing was “not necessary,” as they had proffered sufficient
evidence to show they had been harmed.
Plaintiffs next contended Defendants had been unjustly enriched by
misappropriating Plaintiffs’ Trade Secrets. The trial court inquired whether
that would require a showing of Defendants’ profits. Plaintiffs replied they
would call Kelly Allen, Hayward’s damages expert, to testify on this issue.
After additional argument, the court again paused the hearing to research
the “issue of reopening,” noting Plaintiffs “need[ed] to make a very specific
offer of proof about what piece of evidence [was necessary to] reopen to
address the gap.”
When the hearing reconvened, the trial court confirmed Plaintiffs had a
right to reopen but only if they could make an “ ‘offer of proof’ ” describing the
41
additional evidence they intended to present and “ ‘how it would cure the
deficiencies.’ ” Plaintiffs responded they would recall R. Hayward and
C. Hayward to identify various “invoices” that would show Hayward obtained
revenue from three of ELI’s customers, which in turn would satisfy the
court’s concern about a lack of a “nexus.” The court rejected this offer of
proof, noting revenue was “quite different from income or profit,” and what
was missing was expert testimony regarding Hayward’s profit. It also
rejected their argument these invoices would show Hayward was unjustly
enriched based on the revenue generated from these three companies.
Plaintiffs then asked for additional time to subpoena Kelly Allen. The court
commented it was “absolutely astonish[ed]” that Plaintiffs were going to call
an opposing expert to replace Ghosn’s opinion testimony, denied the request
to reopen, and granted nonsuit.
b. Guiding Principles and Analysis
In response to a nonsuit motion, a plaintiff has the right, upon request,
to reopen the plaintiff’s case-in-chief and present additional evidence: “[I]t is
the trial court’s duty, if so requested, to permit the plaintiff to reopen his [or
her] case and introduce further evidence.” (Charles C. Chapman Building
Co. v. California Mart (1969) 2 Cal.App.3d 846, 858.) Key to the instant case,
a request to reopen must include an offer of proof describing the evidence
with particularity and how such evidence would cure the deficiencies. (See
Alpert, supra, 81 Cal.App.4th at p. 1337.) And even if the trial court errs in
refusing a request to reopen, that error must be prejudicial. (Chapman
Building, at pp. 858-859; accord, Abreu v. Sevenhard’s Swedish Bakery (1989)
208 Cal.App.3d 1446, 1457 [no reversible error in refusing to reopen for
testimony that still would not prove plaintiff’s claim].)
42
We independently conclude the trial court properly refused Plaintiffs’
request to reopen their case-in-chief. Recalling R. Hayward and/or
C. Hayward, as Plaintiffs proposed, to testify about various invoices did not
cure the “overarching problem” identified by the court of the lack of
substantial evidence of a “nexus” between Plaintiffs’ injury and Defendants’
conduct. The same holds true for subpoenaing and calling Hayward’s own
damages expert, as Allen’s opinions were merely based on the assumption
that Plaintiffs had suffered injury-in-fact, but were not independent proof of
such injury.
Finally, because our review of a nonsuit is de novo and we have
independently concluded Plaintiffs’ offer of proof was insufficient to reopen
their case-in-chief, we reject their claim the trial court legally erred in
requiring, as a condition to reopening, a showing they had been “ ‘diligent in
obtaining and producing the evidence.’ ” In any event, we note the court
correctly stated the law when it found after the second recess that Plaintiffs’
right to reopen was conditioned on their making a sufficient offer of proof to
cure the evidentiary deficiencies, which the court then found Plaintiffs had
not done.24
E. Postjudgment Orders
1. Attorney Fees Award
A trial court may award reasonable attorney fees and costs to a
prevailing defendant when a plaintiff’s “claim of misappropriation is made in
24 In light of our decision that nonsuit was properly granted as to all
causes of action, we deem it unnecessary to decide Defendants’ alternative
argument that Plaintiffs’ common law causes of action were preempted under
this state’s Uniform Trade Secret Act (Civ. Code, § 3426 et seq.).
43
bad faith.” (Civ. Code, § 3426.4.)25 “ ‘[B]ad faith’ as used in [Civil Code]
section 3426.4 consists of both ‘objective speciousness of the plaintiff’s
claim . . . and . . . subjective bad faith in bringing or maintaining the claim.’ ”
(SASCO v. Rosendin Electric, Inc. (2012) 207 Cal.App.4th 837, 845 (SASCO),
quoting Gemini Aluminum Corp. v. California Custom Shapes, Inc. (2002)
95 Cal.App.4th 1249, 1262.) “Objective speciousness exists where the action
superficially appears to have merit but there is a complete lack of evidence to
support the claim.” (FLIR Systems, Inc. v. Parrish (2009) 174 Cal.App.4th
1270, 1276 (FLIR Systems), citing Gemini, at p. 1262.)
“Section 3426.4 authorizes the trial court to award attorney fees as a
deterrent to specious trade secret claims. [Citation.] Because the award is a
sanction, a trial court has broad discretion in awarding fees.” (FLIR Systems,
supra, 174 Cal.App.4th at p. 1275; accord, Yield Dynamics, Inc. v. TEA
Systems Corp. (2007) 154 Cal.App.4th 547, 577 [an award of attorney fees
“will not be overturned in the absence of a manifest abuse of discretion, a
prejudicial error of law, or necessary findings not supported by substantial
evidence”].)
The record shows the trial court awarded Hayward attorney fees of
$254,147.40 for Plaintiffs’ “bad faith” in asserting their misappropriation
cause of action. The court in its December 15 and 30, 2021 minute orders
found the award was justified based on Plaintiffs’ failure to proffer sufficient
25 “If a claim of misappropriation is made in bad faith, a motion to
terminate an injunction is made or resisted in bad faith, or willful and
malicious misappropriation exists, the court may award reasonable attorney’s
fees and costs to the prevailing party. Recoverable costs hereunder shall
include a reasonable sum to cover the services of expert witnesses, who are
not regular employees of any party, actually incurred and reasonably
necessary in either, or both, preparation for trial or arbitration, or during
trial or arbitration, of the case by the prevailing party.” (Civ. Code, § 3426.4.)
44
evidence that information alleged to be trade secrets (i.e., customer
information, SOPs, and vendor pricing) had “independent economic value”; or
that Plaintiffs undertook reasonable efforts to keep such information
confidential; or that they suffered any resulting damages from its
misappropriation. In light of our decision that nonsuit on Plaintiffs’
misappropriation claim was proper, including on these grounds, we conclude
their misappropriation claim satisfies the “objective speciousness”
requirement. (See SASCO, supra, 207 Cal.App.4th at pp. 848-849 [claim was
objectively specious due to absence of evidence of misappropriation].)
Plaintiffs, however, contend the trial court committed error because it
failed to find they acted in subjective bad faith. “Subjective bad faith under
[Civil Code] section 3426.4 means the action was commenced or continued for
an improper purpose, such as harassment, delay, or to thwart competition”
(SASCO, supra, 207 Cal.App.4th at p. 847); and may be inferred from such
evidence (FLIR Systems, supra, 174 Cal.App.4th at p. 1278).
At a hearing in March 2016 on Plaintiffs’ application for a preliminary
injunction, the trial court26 found Plaintiffs had made an insufficient
showing of “likelihood of success” on the merits of their misappropriation
claim, including because the information they claimed was misappropriated
was likely not a trade secret.
Specifically, during the injunction hearing the trial court found that the
customer list (E. Alvarez e-mailed to himself) contained general information
available from “public sources” including the DTSC Web site; that there was
no evidence Plaintiffs went to “great expense and effort” to compile the list;
26 We note the judge at the March 2016 injunction hearing was the same
judge who presided over the June 2021 trial and granted Defendants’ nonsuit
motions.
45
and therefore, that the list did not provide “independent economic value” to
Plaintiffs. The court also found that the 21 SOPs R. Hayward e-mailed to
M. Alvarez were likely not a trade secret, noting many of them were training
forms and manuals and were based on public information including the Code
of Federal Regulations; and that the vendor pricing information was also
likely not a secret, as it appeared they were merely “pricing lists, which
would be information that is generally available to the public.” Significantly,
this is the nearly the same information Plaintiffs relied on at trial to support
their nonsuited misappropriation claim.
We conclude the evidence from the March 2016 hearing and the
inferences drawn from their lack of evidence on this cause of action are
sufficient to support a finding of Plaintiffs’ subjective bad faith. (See FLIR
Systems, supra, 174 Cal.App.4th at p. 1278 [noting an inference of subjective
bad faith may be found when a plaintiff “proceeds to trial after the action’s
fatal shortcomings are revealed by opposing counsel”].) We thus affirm the
award of attorney fees for Hayward, as Plaintiffs on appeal do not challenge
the amount of that award.
2. Expert Witness Fees
Following the trial court’s granting of his nonsuit motion, Tabush
sought costs including expert witness fees of $13,525.60. Tabush based the
request on his March 2018 offer to compromise under section 998, in which
he requested a waiver of costs in exchange for his dismissal with prejudice.
Plaintiffs moved to tax only the expert fees in Tabush’s memorandum of
costs.
At the November 2021 hearing, Plaintiffs argued there was no evidence
that Tabush’s forensic accounting expert, Jennie McNulty, had provided any
value in assisting Tabush in the preparation of his case. Tabush disagreed,
46
relying in part on McNulty’s billings that were included in his opposition,
which showed the work she had done as he prepared for trial. The court took
the matter under submission.
The trial court subsequently adopted its tentative, allowing Tabush to
recover expert fees other than $440, which was the cost of preparing McNulty
for a deposition that did not go forward. The court found that, although
McNulty was not deposed and she did not prepare any reports, it was
“reasonable” for Tabush to hire a forensic accountant because the instant
case involved “complex issues of trade secrets and lost profits.” The court
noted all of McNulty’s invoices postdated Tabush’s March 2018 offer to
compromise, and the invoices supported Tabush’s representation that
McNulty was used for “consulting purposes.”
A prevailing party is entitled to recover costs. (§ 1032, subd. (b).)
Section 1033.5, subdivision (a), lists the costs a prevailing party is entitled to
recover, and section 1033.5, subdivision (b), lists costs that are not
recoverable. Costs neither permitted under section 1033.5, subdivision (a),
nor prohibited under section 1033.5, subdivision (b), “may be allowed or
denied in the court’s discretion.” (§ 1033.5, subd. (c)(4).) “Allowable costs
must be ‘reasonably necessary to the conduct of the litigation’ and ‘reasonable
in amount’ ” and not “ ‘merely convenient or beneficial to its preparation.’ ”
(Doe v. Los Angeles County Dept. of Children & Family Services (2019)
37 Cal.App.5th 675, 693; see § 1033.5, subd. (c)(2).) “Costs are allowable if
incurred, whether or not paid.” (§ 1033.5, subd. (c)(1).)
Although expert witness fees are generally not recoverable under
section 1033.5, they may be recoverable under section 998: “If an offer made
by a plaintiff is not accepted and the defendant fails to obtain a more
favorable judgment or award . . . , the court . . . , in its discretion, may require
47
the defendant to pay a reasonable sum to cover postoffer costs of the services
of expert witnesses, who are not regular employees of any party, actually
incurred and reasonably necessary in either, or both, preparation for
trial . . . , or during trial . . . , of the case by the plaintiff, in addition to
plaintiff’s costs.” (§ 998, subd. (d).) Expert witness fees are recoverable even
if the expert does not testify, so long as the expert “aided in the preparation
of the case for trial” and “is a potential witness.” (Evers v. Cornelson (1984)
163 Cal.App.3d 310, 317.)
“ ‘Whether a cost item was reasonably necessary to the litigation
presents a question of fact for the trial court and its decision is reviewed for
abuse of discretion.’ ” (Rozanova v. Uribe (2021) 68 Cal.App.5th 392, 399
(Rozanova); accord, Bender v. County of Los Angeles (2013) 217 Cal.App.4th
968, 990.) We also review a trial court’s award of costs under section 998 for
abuse of discretion. (Bates v. Presbyterian Intercommunity Hospital, Inc.
(2012) 204 Cal.App.4th 210, 221 (Bates).)
We conclude the trial court acted well within its discretion in taxing
only $440 of Tabush’s expert witness fees. (See Rozanova, supra,
68 Cal.App.5th at p. 399; Bates, supra, 204 Cal.App.4th at p. 221.) As noted,
Plaintiffs were seeking damages in excess of $37.55 million against Tabush
and the other defendants in a case involving “complex issues of trade secrets
and lost profits,” as found by the court and as borne out by the issues in this
appeal. It was reasonable for Tabush to hire a forensic accountant to assist
him in preparing for trial. The record shows McNulty reviewed more than
4,000 pages of discovery and documents and several volumes of deposition
transcripts. Tabush also provided copies of her time, broken down by project.
Based on this record and the applicable standard of review, we cannot say the
48
court’s decision to tax only $440 of Tabush’s expert witness fees was an abuse
of discretion.
III. DISPOSITION
The judgment for Defendants R. Hayward, C. Hayward, HEC, Tabush,
E. Alvarez, and S. Alvarez is affirmed. The postjudgment orders awarding
Hayward attorney fees and refusing to tax Tabush’s expert witness fees
(other than for $440) are also affirmed. R. Hayward, C. Hayward, HEC, and
Tabush are entitled to their costs of appeal. (See Cal. Rules of court, rule
8.278(a)(1), (2).)
MCCONNELL, P. J.
WE CONCUR:
BUCHANAN, J.
KELETY, J.
49