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Wallis v. PHL Associates, Inc. (Cal App 11/25/08)

Dale Wallis sued PHL and others for using a vaccine that she allegedly invented; PHL filed a cross-complaint against Dale Wallis, James Wallis, and Hygieia Biological Laboratories for misappropriation of trade secrets. A jury trial was conducted on the complaint only, with the jury finding in favor of Wallis. In connection with the cross-complaint, the trial court imposed sanctions against attorney Mendoza and her clients, which the appellate court affirmed. Dale Wallis, a former PHL employee, sued PHL and others for using a vaccine that she allegedly invented for bovine mastitis; PHL cross-complained for misappropriation of trade secrets. The parties in this case agreed to a protective order, which allowed the parties to file under seal certain confidential documents containing alleged trade secrets. PHL filed the declaration of its attorney, Griffin, with attachments containing what PHL alleged were trade secrets. The attachments contained vaccine formulas and other confidential information. This document was filed in response to a motion filed by the Wallises asking the court to reconsider its holding that PHL's designation of alleged trade secrets was adequate. Although the declaration designated that it was filed under seal pursuant to the protective order, the document later appeared in the court file available to the public. Upon learning of this, Mendoza informed her clients and, in an attempt to defeat PHL's claim that the information attached to the declaration contained trade secrets, Mendoza and her clients had third-parties view and copy the declaration. PHL filed a motion for sanctions against Mendoza and the Wallises for their conduct relating to the declaration. The trial court granted the motion, finding that the actions of Mendoza and her clients had been undertaken in bad faith. The totality of the circumstances surrounding the Griffin declaration would have made it clear to any reasonable attorney that it was filed under seal. The cover of the declaration stated as much and arrived in Mendoza's office in a box stamped "confidential." Many of the pages were marked with a notification that they were confidential under the protective order. Mendoza recognized the contents of the declaration as the trade secrets that were subject to the misappropriation action. Mendoza acted surreptitiously to have her clients or others view the contents of the declaration while it appeared unprotected in the court file in order to argue later that the trade secrets had been made public. Mendoza's contention that she told PHL about the public availability of the declaration and that PHL did nothing about it was unconvincing. Even assuming that the alleged trade secrets lost their status as such after being revealed to the public in the court's file, Mendoza violated the protective order by informing her clients and others of the accessibility of the Griffin declaration. The protective order applied regardless of whether the attachments to the declaration actually contained trade secrets. The protective order provided a procedure for challenging the status of a confidential filing, but Mendoza made no attempt to follow this procedure. Any reasonable attorney would have believed that, to act in good faith, the proper course was to seek guidance from the trial court under the protective order.

Full post as published by The Trade Secrets Vault on December 15, 2008 (boomark / email).