Angelica Textile Services Inc. v. Park

220 Cal. App. 4th 495, 163 Cal. Rptr. 3d 192, 36 I.E.R. Cas. (BNA) 1522, 2013 WL 5615079, 2013 Cal. App. LEXIS 818
CourtCalifornia Court of Appeal
DecidedOctober 15, 2013
DocketD062405
StatusPublished
Cited by65 cases

This text of 220 Cal. App. 4th 495 (Angelica Textile Services Inc. v. Park) is published on Counsel Stack Legal Research, covering California Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Angelica Textile Services Inc. v. Park, 220 Cal. App. 4th 495, 163 Cal. Rptr. 3d 192, 36 I.E.R. Cas. (BNA) 1522, 2013 WL 5615079, 2013 Cal. App. LEXIS 818 (Cal. Ct. App. 2013).

Opinion

Opinion

BENKE, Acting P. J.

In this unfair competition lawsuit, plaintiff, a large-scale laundry business that provided linens to local hospitals and other health care facilities, sued a new competitor in the laundry business and one of its own former employees on a variety of theories, including a claim under the Uniform Trade Secrets Act (Civ. Code, § 3426 et seq.; UTS A). Prior to trial, the trial court granted defendants summary adjudication on all of plaintiff’s non-UTSA claims. The trial court found those claims were preempted or displaced by UTS A. 1

*499 A jury later found that, in fact, none of the information that plaintiff asserted had been wrongfully appropriated was a trade secret within the meaning of UTSA, and the trial court entered a judgment in favor of defendants.

On appeal, plaintiff does not challenge the jury’s verdict but argues the trial court erred in granting summary adjudication with respect to its nonUTSA claims. We agree with plaintiff.

By its terms, UTSA does not displace breach of contract claims, even if they are based in part on the alleged misappropriation of a trade secret. Moreover, UTSA does not displace other claims when they are not based on an alleged misappropriation of a trade secret.

Here, plaintiff asserted a former employee breached his employment agreement and his duty of loyalty to plaintiff because, while still employed by plaintiff, the employee disparaged plaintiff to a local bank and, in negotiating new linen contracts with large customers of plaintiff, gave the customers cancellation rights that are not customary in the industry and that permitted those customers to shortly thereafter take their business to the employee’s new employer. The breach of contract and breach of fiduciary duty theories advanced by plaintiff do not depend on any misappropriation of trade secrets and therefore are not displaced by UTSA. Those theories also independently support plaintiff’s related claims for statutory and common law unfair competition and interference with business relations.

Plaintiff also asserted that upon the employee’s resignation, the employee retained thousands of pages of documents that plaintiff owns. Plaintiff asked that the employee return the documents, and the record shows he failed to do so. Although the documents may have little if any value in light of the jury’s finding defendants did not appropriate any trade secrets, the defendant employee’s possession of them will support a conversion claim independent of any trade secret.

Accordingly, we reverse the trial court’s judgment in part and remand for further proceedings on plaintiff’s non-UTS A claims.

*500 FACTUAL BACKGROUND

A. Angelica

Plaintiff and appellant Angelica Textile Services, Inc. (Angelica), provides linens and laundry services to hospitals and health care facilities throughout the United States. It has operated in the San Diego area for many years and arguably, at all pertinent times, controlled 90 percent of the hospital linen and laundry market in San Diego.

B. Park

Defendant and respondent Jaye Park (Park) began working for Angelica in San Diego in 1982 when Angelica purchased his former employer, Blue Seal Linen. By 2008, Park had been promoted to the position of market vice-president and was responsible for the operations of Angelica’s San Diego and Phoenix laundry plants.

During the course of his employment with Angelica, Park signed a noncompetition agreement under which he promised he would “give his best endeavors, skill and attention to the discharge of his duties with the Company in a manner consistent with his position, at such place or places as may be reasonably expected or required by the Employer in the furtherance of its business.”

Park also promised he would not, during his employment, “become interested, directly or indirectly, as a partner, officer, director, stockholder, advisor, employee, independent contractor or in any other form or capacity, in any other business similar to Company’s business.”

C. Emerald

1. 2008

In 2008, while still employed by Angelica, Park engaged in a series of conversations, preparations and negotiations with representatives of two of Angelica’s largest customers in San Diego, Sharp Healthcare (Sharp) and Scripps Health (Scripps). The goal of the negotiations was a proposed linen and laundry enterprise to be jointly operated by Sharp and Scripps. The new laundry would provide services not only to Sharp and Scripps but also to other Angelica customers.

*501 Given his lengthy experience in the industry, Park prepared a business plan for the joint venture that described both Angelica’s role as virtually the only provider of laundry services in the area and what Park viewed as Angelica’s “limited” and “aged” facilities. The business plan also contained detailed financial projections, including likely production costs and revenues.

In September 2008, Sharp’s board of directors decided not to pursue the laundry joint venture. However, two members of the Sharp board, Tom Gildred and Bob Payne, became very interested in the opportunity to compete in the laundry service business in San Diego and began discussing with Park the possibility of starting an independent competing laundry service in the area.

2. 2009

While still employed by Angelica, Park worked with Gildred and Payne throughout 2009 as the latter two organized a competing laundry business operating as defendant and respondent Emerald Textiles, LLC (Emerald). There is no dispute Gildred and Payne used the business plan Park had prepared in support of the proposed Sharp/Scripps joint venture in promoting their new enterprise, consulted with him, and used him in attempting to obtain financing.

In particular, Park met with officers of the Torrey Pines Bank in the fall of 2009 in an effort to obtain financing for Emerald. According to one of those officers, Park told them Angelica was not providing good quality linens and service to its customers because, following its acquisition by private investors, the company had cut back on spending. Park told the bank he had received comments from hospital personnel to the effect the linen Angelica provided was of poor quality, had stains on it, and was not acceptable to them. Park also provided the bank with photographs of Angelica’s production equipment that portrayed the equipment as of poor quality, old, and in need of repair.

During 2009, Park was also responsible for negotiating new contracts with Angelica’s San Diego customers, including its largest customers, Sharp and Scripps. The 2009 contracts Park negotiated for Sharp, Scripps, and other health care providers permitted the customers to terminate the contracts for Angelica’s services without cause and without penalty on 90 days’ notice. *502

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220 Cal. App. 4th 495, 163 Cal. Rptr. 3d 192, 36 I.E.R. Cas. (BNA) 1522, 2013 WL 5615079, 2013 Cal. App. LEXIS 818, Counsel Stack Legal Research, https://law.counselstack.com/opinion/angelica-textile-services-inc-v-park-calctapp-2013.