Albert's Organics, Inc. v. Holzman

Background

Albert’s Organics, Inc. filed this action against Greg Holzman, Steven Akagaki, Jason Laffer, and Terrafresh Organics, LLC. The complaint alleged violations of the federal Defend Trade Secrets Act and the California Uniform Trade Secrets Act, breach of contract, several interference and inducement claims, breach of the duty of loyalty, and unfair competition.

Albert’s proposed a trade-secret designation containing ten categories. One example described confidential information concerning contracts, leases, inventory sources, pricing, financial records, intellectual property, employee information, customer and supplier relationships, sales, and business operations. The defendants moved to compel a more specific designation.

Legal standard

The court explained that a plaintiff alleging trade-secret misappropriation must identify the trade secrets and show that they exist. It applied the framework in California Code of Civil Procedure section 2019.210 as a method for managing discovery. That provision requires a party alleging trade-secret misappropriation to identify the trade secret with reasonable particularity before beginning discovery concerning the trade secret.

“Reasonable particularity” does not require the plaintiff to describe every detail of the alleged trade secret or to prove the entire misappropriation claim before discovery begins. It requires enough information to distinguish the alleged trade secrets from matters of general knowledge, allow the defendants to investigate, and allow the court to control the scope of discovery.

Analysis

The court rejected Albert’s argument that issue preclusion prevented the defendants from bringing the motion. The court explained that issue preclusion does not apply within the same proceeding and that its earlier ruling on the motion to dismiss addressed whether the complaint stated trade-secret claims, not whether the proposed designation satisfied section 2019.210.

The court also explained that, although the Ninth Circuit had not decided whether section 2019.210 applies in federal diversity cases, courts in the Northern District of California had applied its requirements to California trade-secret claims. The court concluded that the section 2019.210 framework was appropriate for managing discovery in this case.

The court agreed that the customer and supplier information in numbered item two was described with reasonable particularity. It also found numbered item ten sufficiently particular. The remainder of the designation did not meet the standard. The court identified descriptions that were broad enough to apply to almost any company, including product inventory and sales pricing information, pricing and financing resources, and potential venture partners. It also found terms such as Albert’s investment plans and the profitability of business relationships and the enterprise vague. The court found numbered item one broad and vague, portions of item three confusing, and item nine insufficiently limited because it used the catchall term “including.”

Ruling

The court granted the defendants’ motion to compel. Because the designation did not satisfy section 2019.210, the court ordered Albert’s to produce a revised designation, except for the descriptions identified in the order as sufficiently particular. The revised designation must include a plain-English summary of the specific trade secrets at issue and enough detail for the defendants to investigate whether the information differs from general knowledge. It need not explain why the information differs from general knowledge.