Key Decisions

November 2013 – The Uniform Trade Secrets Act Did Not Pre-empt Other Claims

(filed under: Key Decisions | November 20, 2013)

The Uniform Trade Secrets Act Did Not Pre-empt Other Claims

Angelica Textile Services, Inc. v. Park
(Cal. Ct. of App., 4th Dist.), filed October 15, 2013, published October 15, 2013

KEY FACTS

Angelica Textile Services, Inc. provided linens and laundry services to hospitals and healthcare facilities throughout the United States. It operated in the San Diego area for many years and controlled 90 percent of the hospital linen and laundry market in San Diego.

Jay 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 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.”

While still employed by Angelica, Park negotiated certain contracts with Angelica customers, but included in those contracts provisions that would enable those customers to cancel the contracts without penalty. In addition, Park assisted in the creation of a competing business. After he resigned from Angelica, Park became chief operating officer of the new business.

Park’s new business captured much of Angelica’s business in San Diego.

Angelica sued Park and the new business for misappropriation of trade secrets, violation of Business and Professions Code Section 17200, unfair competition, interference with business relationships, and breach of contract and conversion. Angelica also sued Park for breach of fiduciary duty.

In response to a motion for summary adjudication, the trial court ruled that the Uniform Trade Secrets Act (UTSA) pre-empted Angelica’s various claims. A jury then found that none of the wrongfully appropriated information was a trade secret under the UTSA. The trial court entered judgment in favor of the defendants.

Angelica appealed the ruling on the summary adjudication motion, but not the jury’s finding.

HOLDING & REASONING

The Court of Appeal reversed and remanded. It ruled that the UTSA did not displace breach of contract claims, even if they were partially based on the alleged misappropriation of a trade secret. The UTSA did not displace other claims when they were not based on an alleged trade secret misappropriation.

The breach of contract and breach of fiduciary duty theories Angelica advanced did not depend on any trade secret misappropriation and were not displaced by the UTSA. Those theories also independently supported its related claims for statutory and common law unfair competition and interference with business relations.

In particular, as an Angelica employee and signatory to Angelica’s noncompetition agreement, Park owed duties of loyalty to Angelica and there was evidence that despite these duties, he actively engaged in starting a competing business. This evidence would have supported a finding of liability. Thus, the trial court erred in granting a summary adjudication against Angelica.

ANALYSIS

The court was careful to note that it expressed no opinion as to the merits of Angelica’s claims other than that they were not pre-empted or displaced by the UTSA.