The Court of Appeal for California’s Fourth Appellate District recently confirmed that the California Uniform Trade Secrets Act (CUTSA), a broad statute intended to be the last word in trade secret misappropriation cases, does not preclude separate but related common law claims, so long as these claims are not based entirely on the trade secret misappropriation. The ruling echoes similar decisions from other California appellate districts and is helpful to businesses seeking to protect against unfair competition.
In Angelica Textile Services, Inc. v. Park, case number D062405, (Order dated October 15, 2013), the plaintiff, Angelica, sued its former employee, Park, asserting causes of action for misappropriation of trade secrets under CUTSA, breach of contract, breach of fiduciary duty, interference with business relationships, unfair business practices, unfair competition, and conversion. The claims generally arose out of Park’s alleged solicitation of Angelica’s largest customers for a new competing venture he had established while still employed by Angelica, allegedly with the help of hundreds of documents over which Angelica claimed trade secret protection. The trial court granted Park’s motion for summary adjudication with respect to the non-CUTSA claims, holding that those claims were preempted by CUTSA, which, “[a]t least as to common law trade secret misappropriation claims . . . occupies the field in California.” A jury then went on to rule against the company on its CUTSA claims.
The Court of Appeal reversed the dismissal of the non-CUTSA claims. With respect to the breach of contract claim, the court relied on CUTSA’s language to hold that the statute “does not displace breach of contract claims, even if they are based in part on the alleged misappropriation of a trade secret.” In preserving Angelica’s other claims, it held that “CUTSA does not displace noncontract claims that, although related to a trade secret misappropriation, are independent and based on facts distinct from the facts that support the misappropriation claim.” Accordingly, to the extent Angelica’s claims were based at least in part on conduct other than the misappropriation of its trade secrets, its remedies were not limited to those under CUTSA.
The court held that Angelica’s claims were permissible because it did not allege that Park breached his contract with the company, and violated its duties to the company, by misappropriating its trade secrets. Rather, its breach of contract claim was based on Park’s alleged violation of a noncompetition agreement with the company (while Park was still employed), its conversion claim was intended to redress Park’s acquisition of the company’s documents in the event they were not entitled to trade secret protection, and its other claims were based on both the breach of contract and the breach of Park’s duty of loyalty to Angelica. Thus, because none of the claims depended on the trade secret claim, none were barred by CUTSA.
Angelica does not break new ground, but it is a helpful clarification of California’s developing law regarding trade secrets and unfair competition. In particular, California businesses may be comforted to know that the state’s strong public policy against restrictions on competition does not leave them without the means to remedy unfair competition that does not involve the misappropriation of protected trade secrets. In pleading non-CUTSA claims akin to those above, the victims of unfair competition should be careful to make clear exactly which conduct forms the basis of its claims and should consider making explicit the fact that such claims are not based on the misappropriation of trade secrets.