Trade Secrets: $338,288.78 Attorney’s Fees Award Under California’s Uniform Trade Secrets Act Reversed And Remanded

Reason Was That The Trial Judge Based Bad Faith Finding On Determination Which Did Not Fully Encompass The Trade Secret Cause Of Action Relating To The Adversely Impacted Cross-Complainant

            This is part of a continuing trade secret litigation saga, an attorney’s fees proceeding aftermath to a case we posted on in 2016, Dispatch & Tracking Solutions, LLC v. City of San Diego, Case No. D062426 (4^th Dist., Div. 1 April 8, 2016) (unpublished, as discussed in our April 10, 2016 post).

            In essence, Authorized City Towing (ACT) brought a tort/trade secret complaint against the City of San Diego, AutoReturn, Dispatch & Tracking Solutions (DTS), Orion Communications (Orion) and related parties, with DTS fiing its own trade secret cross-complaint against ACT, the City, AutoReturn, and Orion.  The trial court entered judgment against ACT and in favor of AutoReturn on ACT’s fourth amended complaint, and also entered judgment against DTS and in favor of AutoReturn, Orion, and the City on DTS’s second amended cross-complaint.  The lower court granted Orion attorney’s fees and costs under the UTSA fee-shifting provision, awarding Orion fees of $120,000.  AutoReturn and the City also moved for fees under this fee-shifting provision, but the lower court denied the motion as to ACT because it dismissed its trade secret cause of action and granted AutoReturn/City’s motion by awarding $450,000 against DTS.  In the prior 2016 appeal, the 4/1 DCA affirmed the fee award in favor of Orion and AutoReturn, but reversed the fee denial as to AutoReturn vis-à-vis ACT (finding the dismissal of the trade secret cause of action did not divest the lower court of jurisdiction to award fees).  Upon reconsideration of AutoReturn’s fee motion, the lower court awarded UTSA fees against ACT to the tune of $45,820 plus fees against ACT and DTS, jointly and severally, to the tune of $292,468.78.  (Apparently, DTS satisfied the $292,468.78 component of the fee award, such that only $45,820 was in play with respect to ACT.)

            Guess what happened next?  You guessed correctly if you said ACT appealed to the 4/1 DCA.

            The appellate court reversed and remanded again in Authorized City Towing v. Tegsco, LLC, Case No. D071671 (4^th Dist., Div. 1 Feb. 22, 2017; received for posting Feb. 23, 2018) (unpublished).   The reason was that the lower court improperly based the fee against ACT based on the bad faith determination relating to DTS.  On remand, it needed to address the separate trade secret claim of ACT in order to determine the propriety of a fee award. 

             BLOG OBSERVATION—The Court of Appeal observed that the remedy for a trial court’s erroneous motion ruling (based on an incorrect inquiry or factual predicate) is to remand the matter for a new hearing on the motion with directions to the trial court to make the necessary factual findings.  (Linton v. Desoto Cab Co., Inc., 15 Cal.App.5^th 1208, 1218, 1225-1226 (2017).)