CREDIT CARD SERVICES INC VS JOE TEH CHUANG ET AL

Tentative Rulings

Case Number: BC487454    Hearing Date: August 03, 2020    Dept: 61

Defendant United Merchant Services, Inc.’s Motion for Judgment Notwithstanding the Verdict is DENIED.

1. MOTION FOR JNOV

“The court, before the expiration of its power to rule on a motion for a new trial, either of its own motion, after five days' notice, or on motion of a party against whom a verdict has been rendered, shall render judgment in favor of the aggrieved party notwithstanding the verdict whenever a motion for a directed verdict for the aggrieved party should have been granted had a previous motion been made.” (Code Civ. Proc., § 629, subd. (a).)

“The trial judge's power to grant a judgment notwithstanding the verdict is identical to his power to grant a directed verdict. The trial judge cannot weigh the evidence or judge the credibility of witnesses. If the evidence is conflicting or if several reasonable inferences may be drawn, the motion for judgment notwithstanding the verdict should be denied. A motion for judgment notwithstanding the verdict of a jury may properly be granted only if it appears from the evidence, viewed in the light most favorable to the party securing the verdict, that there is no substantial evidence to support the verdict. If there is any substantial evidence, or reasonable inferences to be drawn therefrom, in support of the verdict, the motion should be denied.” (Hauter v. Zogarts (1975) 14 Cal.3d 104, 110, internal quotation marks and citations omitted.)

UMS argues that it cannot be liable for misappropriation of trade secrets because the statute of limitations for any such claim had run before the case against it was filed. (Motion at pp. 5–6.)

“An action for misappropriation must be brought within three years after the misappropriation is discovered or by the exercise of reasonable diligence should have been discovered. For the purposes of this section, a continuing misappropriation constitutes a single claim.” (Civ. Code § 3426.6.) Although this statute provides for delayed accrual for delayed discovery, it has been held that delayed discovery of the identity of the defendant does not toll the limitations period. (Norgart v. Upjohn Co. (1999) 21 Cal.4^th 383, 399.)

UMS argues that BCS had discovered its claim more than three years before bringing it against UMS, because BCS brought the present suit against the other defendants on June, 28, 2012, the statute of limitations had run by the time UMS was added to the FAC in August 2016. (Motion at p. 7.) Moreover, UMS argues that BCS actually knew of UMS’s role in the misconduct by 2011, since Patrick Hong and Yeoung Ho Lee stated on the stand that they knew UMS was providing credit card processing services marketed by Defendants in 2011. (Motion at p. 7.)

BCS argues that its claims against UMS are timely because UMS’s tortious involvement in the case was not discovered until shortly before the amendment including it was filed. BCS relies on trial testimony by Hong to the effect that, early in the litigation, Defendants produced an agreement between UMS and USMS, identifying the latter as a registered Independent Sales Organization (ISO), meaning that UMS and USMS operated independently of each other and did not share liability. (Opposition at p. 3.) BCS claims to have suspected UMS’s responsibility for the alleged misconduct when it learned in late 2015 that USMS, the alleged ISO, and third-party One Merchant Solutions (OMS) had merged earlier that year. (Opposition at p. 3.) It was during its investigation of this merger that BCS learned that the president of OMS, the company that merged with USMS, had the same president as UMS. (Opposition at pp. 3–4.)

“An action for misappropriation must be brought within three years after the misappropriation is discovered or by the exercise of reasonable diligence should have been discovered.” (Civ. Code § 3426.6.) “A plaintiff has reason to discover a cause of action when he or she ‘has reason at least to suspect a factual basis for its elements.’ [Citations.] Under the discovery rule, suspicion of one or more of the elements of a cause of action, coupled with knowledge of any remaining elements, will generally trigger the statute of limitations period.” (Cypress Semiconductor Corp. v. Superior Court (2008) 163 Cal.App.4^th 575, 586.) “Since the identity of the defendant is not an element of a cause of action, the failure to discover the identity of the defendant does not postpone accrual of the cause of action.” (Id. at p. 587.)

The court agrees with BCS that sufficient evidence was produced at trial to support its delayed discovery of its cause of action against UMS, and thus no judgment notwithstanding the verdict is proper. The testimony of Hong and Lee provides sufficient basis for the trier of fact to conclude that BCS lacked reason to discover its cause of action against UMS until much later in the litigation. Both parties concede that UMS’s liability in this action, as determined by the jury resulted from its ratification of the misappropriation of trade secrets. (Motion at p. 2; Opposition at p. 7.) “[S]ince ratification contemplates an act by one person in behalf of another, there must exist at the time the unauthorized act was done a relationship, either actual or assumed, or principal and agent, between the person alleged to have ratified and the person by whom the unauthorized act was done.” (Anderson v. Fay Imp. Co. (1955) 134 Cal.App.2d 738, 748.) The trial testimony provided the trier of fact with substantial evidence that BCS lacked notice of such a relationship between UMS and other defendants.

UMS in reply argues that the limitations period for a trade-secret misappropriation claim begins to run when the plaintiff suspects or has reason to suspect that a third party acquired or used its trade secrets knowing or with reason to know that it was using plaintiff’s trade secrets. (Reply at pp. 4–5, citing Cypress Semiconductor Corp. v. Superior Court (2008) 163 Cal.App.4^th 575, 588.) But once more, this court cannot conclude the provision of credit card processing services marketed by other defendants was sufficient to put BCS on notice that UMS was knowingly or negligently using BCS’s trade secrets.

Accordingly, the Motion for JNOV is DENIED.