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Superior Court of California Attorneys’ Fees Award Punishes Plaintiff’s Bad-Faith Litigation for Alleged Misappropriation of Trade Secrets

A California Superior Court Judge in Orange County granted an attorneys’ fees award in the amount of $5.8 million to defendant Landmark Event Staffing Services, Inc. (“Landmark”) in Contemporary Services Corporation v. Landmark Event Staffing Services, Inc., Case No. 30-2009-00123939. This ruling reinforces the importance of carefully calibrating litigation strategy in trade secrets misappropriation cases to focus on vindicating legally protectable interests. Trade secrets litigation should not be used merely as an aggressive tactic to stifle a competitor.

Under California Civil Code § 3426.4, “[i]f a claim of misappropriation is made in bad faith, . . . the court may award reasonable attorney’s fees and costs to the prevailing party.” Quoting Dr. V. Productions, Inc. v. Rey (2021) 68 Cal. App. 5th 793, 796, the court noted that “[i]n enacting [California Civil Code § 3426.4], the Legislature was concerned with curbing specious actions for misappropriation of trade secrets,” and that “[a]n award of reasonable attorney’s fees may act as a deterrent to specious claims of misappropriation.”

The court found that plaintiff Contemporary Services Corporation (“Contemporary”) pursued its trade secrets misappropriation case against Landmark in bad faith because:

  • Contemporary initially demanded $5.8 million to settle the case, which, according to the court, was an “outrageous demand” and “evidence of bad faith”;

  • Contemporary’s President “habitually use[d] litigation to attack competit[ors]”;

  • “[Contemporary] essentially had a business plan to file and maintain unmeritorious claims against competitors”; and

  • After thirteen years of litigation, Contemporary opted to voluntarily dismiss the case one month before trial. As the Court put it, “[a]fter forcing its opponent to incur millions in attorney fees, [Contemporary] effectively said, ‘Oh, never mind.’”

Notably, the Court’s order only analyzed the “subjective bad faith” of Contemporary’s conduct. The Court did not analyze the “objective speciousness” of Contemporary’s claim, which is required to award attorneys’ fees for “bad faith” litigation under California Civil Code § 3426.4.  See FLIR Systems, Inc. v. Parrish (2009) 174 Cal.App.4th 1270, 1275-76.  The parties’ 13-year litigation saga included an appeal before the Ninth Circuit U.S. Court of Appeals, which reversed a district judge’s ruling that granted summary judgment in Landmark’s favor on the trade secrets and breach of contract claims, and found that Contemporary raised triable issues as to whether certain Contemporary documents qualified as trade secrets. The Ninth Circuit’s decision appeared to lend credence to Contemporary’s position that its trade secrets misappropriation theory was not frivolous or brought in bad faith.  However, the Superior Court found that Contemporary filed suit, and litigated the case for over a decade, for “specious” purposes, notwithstanding the trade secrets misappropriation claim capable of supporting a legitimate suit.

©2022 Epstein Becker & Green, P.C. All rights reserved.National Law Review, Volume XII, Number 131
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About this Author

Edward J. Loya Litigation Lawyer Epstein Becker Green Law Firm
Member of the Firm

Edward J. Loya is a Member of the Firm in the Litigation & Business Disputes and Employment, Labor & Workforce Management practices at Epstein Becker Green. He focuses on civil, employment, and criminal litigation matters and represents companies and individuals in investigations, prosecutions, and regulatory cases initiated by government agencies. Currently based in Dallas, Mr. Loya practices throughout the United States and has offices in New York and Los Angeles. 

Specifically, Mr. Loya:

  • Advises clients in connection with government investigations relating to...
212-351-3744
Daniel J. Green, labor, employment, attorney, Epstein Becker, law firm
Associate

DANIEL J. GREEN is an Associate in the Labor and Employment practice, in the New York office of Epstein Becker Green.

Mr. Green:

  • Defends clients in EEOC investigations

  • Defends clients against unfair labor practice complaints involving, among other things, ambiguities in collective bargaining agreements

  • Opposes the class certification of plaintiffs in actions alleging misclassification as independent contractors

    ...
212-351-3752
Phillip K. Antablin Labor Law Attorney Epstein Becker Los Angeles
Associate

Attorney Phillip Antablin represents employers in a wide range of industries, including entertainment, financial services, health care, hospitality, retail, technology, and telecommunications.

He advises on and litigates unfair competition, non-compete, and trade secret matters, including disputes involving corporate raiding and the misappropriation of trade secrets by former employees. He defends management in employment litigation involving discrimination, harassment, retaliation, and wrongful termination matters and disability claims under...

310-557-9524
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