This case was last updated from Los Angeles County Superior Courts on 10/18/2020 at 07:41:41 (UTC).

ABAD FOAM INC VS RANDHWAN NAIDU ET AL

Case Summary

On 03/29/2018 ABAD FOAM INC filed a Property - Other Property Fraud lawsuit against RANDHWAN NAIDU. This case was filed in Los Angeles County Superior Courts, Stanley Mosk Courthouse located in Los Angeles, California. The Judges overseeing this case are ROBERT L. HESS, PATRICIA D. NIETO, BARBARA M. SCHEPER and DAVID J. COWAN. The case status is Pending - Other Pending.

Case Details Parties Documents Dockets

 

Case Details

  • Case Number:

    ****0112

  • Filing Date:

    03/29/2018

  • Case Status:

    Pending - Other Pending

  • Case Type:

    Property - Other Property Fraud

  • Court:

    Los Angeles County Superior Courts

  • Courthouse:

    Stanley Mosk Courthouse

  • County, State:

    Los Angeles, California

Judge Details

Presiding Judges

ROBERT L. HESS

PATRICIA D. NIETO

BARBARA M. SCHEPER

DAVID J. COWAN

 

Party Details

Plaintiffs, Petitioners and Cross Defendants

ABAD FOAM INC.

NAIDU RANDHWAN

CHAVEZ CESAR

CHAVEZ ABAD

Defendants, Respondents and Cross Plaintiffs

ALCAZAR FELIPE JR>

EBM FOAM CORPORATION

NAIDU RANDHWAN

FOAM FACTORY

ALCAZAR FELIPE

DOES 1-50

ALCAZAR FELIPE JR.

DOES 1 THROUGH 50

FOAM FACTORY INC.

Not Classified By Court

EFI EMPIRE FOAM INNOVATIONS INC

Attorney/Law Firm Details

Plaintiff and Petitioner Attorneys

ESCH IV. ROBERT A VON

VON ESCH LAW GROUP ALC

VONESCH ROBERT ALEXANDER IV

Defendant and Respondent Attorneys

TOSCANO OSCAR E. LAW OFFICES OF

PARK & LIM

OSCAR E. TOSCANO LAW OFFICES OF

BLOOM DAVID BRUCE

TOSCANO OSCAR E

TOSCANO OSCAR

LIM SHI YOUNG

Defendant and Cross Plaintiff Attorney

BLOOM DAVID BRUCE

Cross Defendant Attorney

REQUEJO TOMAS

 

Court Documents

Objection - OBJECTION TO THE DECLARATION OF DAVID LUU AND TO THE MOTION TO COMPEL ESI DISCOVERY

1/15/2020: Objection - OBJECTION TO THE DECLARATION OF DAVID LUU AND TO THE MOTION TO COMPEL ESI DISCOVERY

Declaration - DECLARATION OF FELIPE GUDINO ALCAZAR IN OPPOSITION TO MOTION TO COMPEL ESI DISCOVERY

1/15/2020: Declaration - DECLARATION OF FELIPE GUDINO ALCAZAR IN OPPOSITION TO MOTION TO COMPEL ESI DISCOVERY

Separate Statement

1/15/2020: Separate Statement

Objection - OBJECTION TO DECLARATION OF ALCAZAR IN OPP TO MTC ESI

1/24/2020: Objection - OBJECTION TO DECLARATION OF ALCAZAR IN OPP TO MTC ESI

Reply - REPLY TO OPPOSITION OF DEFENDANTS TO MOTION AND MOTION FOR AN ORDER TO VACATE TRIAL DATE

7/17/2019: Reply - REPLY TO OPPOSITION OF DEFENDANTS TO MOTION AND MOTION FOR AN ORDER TO VACATE TRIAL DATE

Declaration - DECLARATION IN SUPPORT TO CONTINUE THE TRIAL DATE AND DECLARATION OF TOMAS D REQUEJO

7/19/2019: Declaration - DECLARATION IN SUPPORT TO CONTINUE THE TRIAL DATE AND DECLARATION OF TOMAS D REQUEJO

Motion to Compel Further Discovery Responses

6/7/2019: Motion to Compel Further Discovery Responses

Answer

6/12/2019: Answer

Reply - REPLY TO OPPOSITION TO MOTION TO COMPEL FURTHER RESPONSES AND PRODUCTION OF DOCUMENTS

4/30/2019: Reply - REPLY TO OPPOSITION TO MOTION TO COMPEL FURTHER RESPONSES AND PRODUCTION OF DOCUMENTS

Motion to Compel Further Discovery Responses

4/3/2019: Motion to Compel Further Discovery Responses

Memorandum of Points & Authorities

3/27/2019: Memorandum of Points & Authorities

Notice - NOTICE OF WITHDRAWAL OF MOTION TO COMPEL

3/14/2019: Notice - NOTICE OF WITHDRAWAL OF MOTION TO COMPEL

Minute Order - Minute Order (Hearing on Demurrer - without Motion to Strike; Informal Disc...)

3/4/2019: Minute Order - Minute Order (Hearing on Demurrer - without Motion to Strike; Informal Disc...)

Motion to Strike (not initial pleading)

2/5/2019: Motion to Strike (not initial pleading)

Answer - Answer to Plaintiff's Second Amended Complaint

12/24/2018: Answer - Answer to Plaintiff's Second Amended Complaint

Minute Order - Minute Order (Hearing on Motion to Compel Further Discovery Responses to Re...)

11/28/2018: Minute Order - Minute Order (Hearing on Motion to Compel Further Discovery Responses to Re...)

Declaration - Declaration of Robert A. Von Esch IV, Esq. in Support of Abad Foam Inc.'s Motions to Compel Further Discovery Responses and Request for Monetary Sanctions

10/19/2018: Declaration - Declaration of Robert A. Von Esch IV, Esq. in Support of Abad Foam Inc.'s Motions to Compel Further Discovery Responses and Request for Monetary Sanctions

DEFENDANTS EBM FOAM CORPORATION AND FELIPE ALCAZAR JR.'S NOTICE OF DEMURRER AND DEMURRER TO FIRST AMENDED COMPLAINT; ETC

8/16/2018: DEFENDANTS EBM FOAM CORPORATION AND FELIPE ALCAZAR JR.'S NOTICE OF DEMURRER AND DEMURRER TO FIRST AMENDED COMPLAINT; ETC

235 More Documents Available

 

Docket Entries

  • 03/16/2021
  • Hearing03/16/2021 at 08:30 AM in Department 24 at 111 North Hill Street, Los Angeles, CA 90012; Order to Show Cause Re: Lifting the Stay

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  • 03/16/2021
  • Hearing03/16/2021 at 08:30 AM in Department 24 at 111 North Hill Street, Los Angeles, CA 90012; Status Conference

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  • 03/16/2021
  • Hearing03/16/2021 at 08:30 AM in Department 24 at 111 North Hill Street, Los Angeles, CA 90012; Trial Setting Conference

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  • 10/13/2020
  • Docketat 08:30 AM in Department 24; Hearing on Motion for Leave (MOTION FOR LEAVE TO CONDUCT FINANCIAL DISCOVERY ON DEFENDANTS EBM FOAM CORPORATION AND FELIPE ALCAZAR JR.) - Not Held - Advanced and Vacated

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  • 10/06/2020
  • Docketat 08:30 AM in Department 24; Hearing on Motion for Leave (MOTION FOR LEAVE TO CONDUCT FINANCIAL DISCOVERY ON DEFENDANT RANDHWAN NAIDU) - Not Held - Advanced and Vacated

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  • 09/17/2020
  • Docketat 08:30 AM in Department 24; Hearing on Motion to Compel (Motion to compel deposition of Randhwan Naidu)

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  • 09/15/2020
  • Docketat 09:30 AM in Department 24; Trial Setting Conference - Held - Continued

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  • 09/15/2020
  • Docketat 09:30 AM in Department 24; Order to Show Cause Re: (Lifting the Stay) - Held - Continued

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  • 09/15/2020
  • DocketNotice (Amended Notice of Ruling 091520); Filed by Abad Foam, Inc. (Plaintiff)

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  • 09/15/2020
  • DocketMinute Order ( (Order to Show Cause Re: Lifting the Stay; Trial Setting Confe...)); Filed by Clerk

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348 More Docket Entries
  • 05/14/2018
  • DocketDemurrer; Filed by Foam Factory, Inc. (Defendant); Felipe Alcazar (Defendant)

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  • 05/14/2018
  • DocketPoints and Authorities; Filed by Foam Factory, Inc. (Defendant); Felipe Alcazar (Defendant)

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  • 05/14/2018
  • DocketNOTICE OF DEMURRER AND DEMURRER BY FOAM FACTORY AND FELIPE ALCAZAR TO COMPLAINT, (MEMORANDUM OF POINTS AND ATHORITIES IN SUPPORT THEREOF ARE FILED IN A SEPARATE PLEADING)

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  • 05/14/2018
  • DocketMEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEMURRER BY FOAM FACTORY AND FELIPE ALCAZAR TO COMPLAINT

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  • 04/25/2018
  • DocketNotice of Case Management Conference; Filed by Clerk

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  • 04/25/2018
  • DocketNOTICE OF CASE MANAGEMENT CONFERENCE

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  • 03/29/2018
  • DocketSummons; Filed by Abad Foam, Inc. (Plaintiff)

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  • 03/29/2018
  • DocketSUMMONS

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  • 03/29/2018
  • DocketCOMPLAINT FOR DAMAGES AND INJUNCTIVE RELIEF, BASED UPON: 1. FRAUD;ETC

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  • 03/29/2018
  • DocketComplaint; Filed by Abad Foam, Inc. (Plaintiff)

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Tentative Rulings

Case Number: BC700112    Hearing Date: March 04, 2020    Dept: 24

Defendants Felipe Alcazar, Jr. and EBM Foam Corporation’s motion for summary judgment is DENIED. Defendants’ alternative motion for summary adjudication is GRANTED as to issue no. 2 and DENIED as to the remainder.

On March 29, 2018, Plaintiff Abad Foam, Inc. (“Plaintiff”) commenced this action against Randhwan Naidu (“Naidu”), Felipe Alcazar (“Alcazar”), Felipe Alcazar, Jr. (“Alcazar Jr.”), EBM Foam Corporation (“EBM”) and Foam Factory Inc. (“FF”). On November 9, 2018, Plaintiff filed the operative Second Amended Complaint (“SAC”), which alleges eleven causes of action for: (1) fraud; (2) misappropriation of trade secrets; (3) breach of duty of loyalty; (4) breach of fiduciary duty; (5) intentional interference with prospective economic advantage; (6) unlawful business practices; (7) conversion; (8) quantum valebant; (9) violation of Penal Code § 496; (10) aiding and abetting breach of duty of loyalty; and (11) aiding and abetting breach of fiduciary duty. This action arises from allegations that Defendants conspired together to steal goods and proprietary information from Plaintiff, a competitor in the foam manufacturing business.

On December 18, 2019, EBM and Alcazar Jr. (“Moving Parties”) moved for summary judgment or adjudication against each cause of action alleged against them and punitive damages. On February 19, 2020, Plaintiff filed an opposition. On February 28, 2020, moving parties submitted a reply.

Summary Judgment Standard

A party may move for summary adjudication as to one or more causes of action, affirmative defenses, claims for damages, or issues of duty if that party contends that there is no merit to the cause of action, defense, or claim for damages, or if the party contends that there is no duty owed. (See CCP §437c(f)(1).) “A motion for summary adjudication shall be granted only if it completely disposes of a cause of action, an affirmative defense, a claim for damages, or an issue of duty.” (Ibid.) A cause of action has no merit if: (1) one or more elements of the cause of action cannot be separately established, even if that element is separately pleaded, or (2) a defendant establishes an affirmative defense to that cause of action. (See CCP §437c(n); Union Bank v. Superior Court (1995) 31 Cal.App.4th 573, 583.) Once the defendant has shown that a cause of action has no merit, the burden shifts to the plaintiff to show that a triable issue of material fact exists as to that cause of action. (See CCP §437c(o)(2); Union Bank, supra, 31 Cal.App.4th at 583.)

In order to obtain summary judgment, “all that the defendant need do is to show that the plaintiff cannot establish at least one element of the cause of action.” (See Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 853; see also Mitchell v. United National Ins. Co. (2005) 127 Cal.App.4th 457.) “Although he remains free to do so, the defendant need not himself conclusively negate any such element.” (Ibid.) “Once the defendant has made such a showing, the burden shifts to the plaintiff to show that a triable issue of one or more material facts exists as to that cause of action or as to a defense to the cause of action. If the plaintiff does not make such a showing, summary judgment in favor of the defendant is appropriate.” (See Mitchell, supra, 127 Cal.App.4th at 467.)

Until the defendant meets this evidentiary burden, the plaintiff has no burden to present evidence showing a triable issue of fact. (See Hagen v. Hickenbottom (1995) 41 Cal.App.4th 168, 178; see also Hawkins v. Wilton (2006) 144 Cal.App.4th 936, 940, citing Duckett v. Pistoresi Ambulance Service, Inc. (1993) 19 Cal.App.4th 1525, 1533 [“[w]here the evidence presented by defendant does not support judgment in his favor, the motion must be denied without looking at the opposing evidence, if any, submitted by plaintiff”].)

Evidentiary Rulings

Plaintiff’s objections to ¶ 5 of the Alcazar Jr. declaration is SUSTAINED as to hearsay. The remainder of the objections are OVERRULED. Plaintiff’s objection to the Macias declaration ¶ 4 is OVERRULED. The remainder of Plaintiff’s objections go to immaterial evidence. (CCP § 437c(q).)

Moving parties’ objections nos. 6, 13, 22-27, 35 and 36-43 are OVERRULED; and objections nos. 28-34, and 44-46 are SUSTAINED in part as to hearsay, as discussed below. This only affects Naidu’s statements concerning the purported black mail, which attempts to shift blame and therefore does not fall under the hearsay exception. The remainder of moving parties’ objections go to immaterial evidence. (CCP § 437c(q).)

Admissibility of Naidu’s Statements

This decision largely turns on the admissibility of Naidu’s admissions regarding the alleged conspiracy. To this end, the Chavez declaration paragraphs 6-17 details Naidu’s admissions to Chavez and exhibit 6 is Naidu’s taped admission which generally confirms those admissions. (See also Chavez Decl., Ex. 7 [transcript of video in exhibit 6].) It is undisputed that Naidu’s statements are hearsay. The question is whether an exception applies, such as Evid. Code section 1230 or 1223. The Court finds that Evid. Code section 1230 applies.[1]

“[H]earsay statements are generally inadmissible under California law[.]” (People v. Grimes (2016) 1 Cal.5th 698, 710-711.) “ ‘The chief reasons for this general rule of inadmissibility are that the statements are not made under oath, the adverse party has no opportunity to cross-examine the declarant, and the jury cannot observe the declarant's demeanor while making the statements.’ [Citation.]” (People v. Duarte (2000) 24 Cal.4th 603, 601.)

The rule, however, has several exceptions.

Evidence Code section 1230 permits the admission of any statement that “when made... so far subjected [the declarant] to the risk of civil or criminal liability... that a reasonable [person] in [the declarant’s] position would not have made the statement unless [they] believed it to be true.” “[T]he rationale underlying [this] exception is that ‘a person's interest against being criminally implicated gives reasonable assurance of the veracity of his statements made against that interest,’ thereby mitigating the dangers usually associated with the admission of out-of-court statements.” (Grimes, supra, 1 Cal.5th at 711; see People v. Gallardo (2017) 18 Cal.App.5th 51, 70.) To demonstrate that an out-of-court declaration is admissible as a declaration against interest, the proponent of such evidence must show that the declarant is unavailable, that the declaration was against the declarant's penal interest when made and that the declaration was sufficiently reliable to warrant admission despite its hearsay character. (Evid. Code § 1230; see Gallardo, supra, 18 Cal.App.5th at 70.)

The “against interest” issue is a preliminary/foundational matter for the court to determine. (See Evid. Code § 405.) Evidence Code section 1230 does not permit the admission of “any statement or portion of a statement not itself specifically disserving to the interests of the declarant.” (People v. Leach (1975) 15 Cal.3d 419, 441.) In other words, a self-serving statement clearly lacks the trustworthiness envisioned by the exception, and statements that are both self-serving and disserving are admissible under only with respect to the disserving portion. Leach concerned the admissibility of coconspirators' extrajudicial confessions implicating other defendants in a murder plot, which the prosecution introduced as declarations against penal interest. (Id. at 428, 438.) The California Supreme Court concluded that to the extent the confessions contained collateral assertions that inculpated the defendant, rather than the confessor, the statements were inadmissible. (Id. at 441–442.) The Leach Court explained that those portions of a confession inculpating others are not as inherently trustworthy as those portions that are disserving to the declarant's interests. (Id. at 439–441.) This is consistent with the constitutional right of a defendant to confront his or her accusers embodied by the Constitution and the rule against hearsay. (Id. at 441.)

“That a hearsay statement may be facially inculpatory or neutral cannot always be relied upon to indicate whether it is ‘truly self-inculpatory, rather than merely [an] attempt [ ] to shift blame or curry favor.’ Even a hearsay statement that is facially inculpatory of the declarant may, when considered in context, also be exculpatory or have a net exculpatory effect.” (Duartesupra, 24 Cal.4th at 611-612 [citations omitted].) A “statement ‘which is in part inculpatory and in part exculpatory (e.g., one which admits some complicity but places the major responsibility on others) ... is ... inadmissible.’” (Id. at 612.) Thus, “ ‘an approach which would find a declarant's statement wholly credible solely because it incorporates an admission of criminal culpability is inadequate.’ ” (Id. at 611.) “This is not to say that a statement that incriminates the declarant and also inculpates the nondeclarant cannot be specifically disserving of the declarant's penal interest.” (People v. Greenberger (1997) 58 Cal.App.4th 298, 335.) For example, the exception permits the “admission of those portions of a confession that, though not independently disserving of the declarant's penal interests, also are not merely ‘self-serving,’ but ‘inextricably tied to and part of a specific statement against penal interest.’ [Citation.]” (Grimes, supra, 1 Cal.5th at 716.)

The court must exercise its discretion in applying “to the peculiar facts of the individual case a broad and deep acquaintance with the ways human beings actually conduct themselves in the circumstances material under the [§ 1230] exception.” (People v. Frierson (1991) 53 Cal.3d 730, 745-746.) The court must consider not simply the declarant's words but also the circumstances under which they were spoken, the declarant's possible motivation, and the declarant's relationship to the parties. (Ibid.) The Leach rule is not to be applied in “a rigid or hypertechnical” fashion, such that courts must “sever and excise any and all portions of an otherwise inculpatory statement that do not ‘further incriminate’ the declarant. Ultimately, courts must consider each statement in context in order to answer the ultimate question under section 1230: Whether the statement, even if not independently inculpatory of the declarant, is nevertheless against the declarant's interest, such that ‘a reasonable man in [the declarant's] position would not have made the statement unless he believed it to be true.’” (Grimes, supra, 1 Cal.5th at 716-717, 720.) “[S]uch a statement is more likely to satisfy the against-interest exception when the declarant accepts responsibility and denies or diminishes others' responsibility, as in the example ‘ “I robbed the store alone,” ’ as opposed to attempting to assign greater blame to others, as in the example, ‘ “I did it, but X is guiltier than I am.”’” (Id. at 716 [citations omitted].)

Here, upon reviewing the evidence provided in context, the Court finds that the exception applies. First, it is undisputed that Naidu was/is unavailable. He invoked his Fifth Amendment right not to incriminate himself, which, for hearsay rule purposes, makes him not available as a witness. (Evid. Code § 240(a)(1); Duarte, supra, 24 Cal.4th at 609–610.) Naidu obviously sufficient personal knowledge of his statements concerning his actions and interactions with Defendants

The only disputed element of the exception whether certain portions of the admissions related to moving parties’ conduct are also against Naidu’s interest in light of the Leach rule. The statements are clearly against Naidu’s own interest, as they exposed him to both criminal and civil liability. Naidu admitted to Chavez that he was stealing trim foam from Plaintiff. (Chavez Decl., ¶ 7 [moving parties do not dispute that this statement is against Naidu’s interest, but contest the remainder].) Naidu admitted that he was selling the stolen trim foam to FF/FAJ, and confessed that he was going to Phillip’s house to collect cash payments. (Id., ¶ 8.) Naidu explained that Phillip (Alcazar Jr.) initially did not know he was stealing trim foam, but discovered this later. (Id. ¶ 9.) Naidu said he wanted to stop but was coerced by moving parties into continuing to sell the foam at lower prices. (Id. ¶¶ 10-12.) After Naidu was reported to the police and arrested, he also emailed Chavez a video confession reaffirming these events with no prompting from Plaintiff. (Id. ¶¶ 15-17.)

The principal purpose of Naidu’s admissions were his confession and admission of his liability. Naidu’s statements concerning his interactions with moving parties (and their implicit knowledge of the fraud/theft) is a confession that includes information inextricably tied to and part of his specific statement against his own penal interest. His inclusion of the facts concerning moving parties neither has a “net exculpatory effect” (Duartesupra, 24 Cal.4th at 611-612) nor do such facts transform his confession into a “I did it, but X is guiltier than I am” statement (Grimes, supra, 1 Cal.5th at 716). This is more akin to a statement that “I did it with X” which principally pertains to Naidu’s own liability. Therefore, the statement does not lack the trustworthiness envisioned by the exception, since these statements were against his interest, exposing him to both criminal and civil liability.

Unlike moving parties’ cited cases where evidence was properly excluded, the majority of the specific statements above do little to shift blame or diminish his own liability. At best, only portions of paragraphs 11, 12 and 13 of the Chavez declaration that deal with the purported “blackmail” are an attempt to shift blame, and thus are not statements against interest. Further, such statements would not actually shift blame or make Naidu any less liable in the context presented. Thus, it is difficult to categorize them as exculpatory. The Court is not convinced that such statements should be excised, lest the Court perform the hyper-technical analysis that the California Supreme Court warns against. (See Grimes, supra, 1 Cal.5th at 716.) If the Court were to sustain the objections, it would only be to paragraphs 11, 12 and 13 concerning the purported blackmail, and related statements found in exhibits 6 and 7. However, exclusion of the blackmail facts alone would not defeat the evidence which shows moving party’s knowledge of the scheme, which is the critical evidence here.

Issue No. 1: Fraud

Moving Parties move against the first cause of action on the grounds that the elements of misrepresentation and intent to deceive/knowledge of falsity are absent.

The elements of a claim for fraud are (1) misrepresentation of a material fact; (2) knowledge of falsity or lack of a reasonable ground for belief in the truth of the representation; (3) intent to induce reliance; (4) actual and justifiable reliance by the plaintiff; and (5) resulting damage. (Orient Handel v. United States Fid. & Guar. Co. (1987) 192 Cal.App.3d 684, 693.)

As to misrepresentation, moving parties argue that they had no role in the preparation of invoices and had no knowledge of the internal operations of plaintiff. (SSUF 16; Alcazar Jr. Decl., ¶ 11, Ex. B.) As to their own knowledge, moving parties state that they were unaware that Naidu was misappropriating the sales proceeds from the sales from Plaintiff to ABM, and was done in the ordinary course of business. (SSUF 17; Alcazar Jr. Decl., ¶¶ 17, 21, Ex. B.) This carries their initial burden. Plaintiff disputes this fact by presenting evidence of a conspiracy between Naidu and moving parties regarding the preparation of invoices.

“Conspiracy is not a cause of action, but a legal doctrine that imposes liability on persons who, although not actually committing a tort themselves, share with the immediate tortfeasors a common plan or design in its perpetration.” (Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 511.) By participating, a co-conspirator effectively adopts as their own the torts of other co-conspirators within the ambit of the conspiracy. In this way, a co-conspirator incurs tort liability co-equal with the immediate tortfeasors. (Wyatt v. Union Mortgage Co. (1979) 24 Cal.3d 773, 784.)

Plaintiff presents evidence that Defendants, including moving parties, were a part of a conspiracy to steal foam products from Plaintiff. Naidu created false sales invoices to trigger the delivery of certain products to Defendants, and thereafter delete them before they were discovered by Plaintiff’s billing and collections department. (SSMF 1 [moving parties do not dispute that Naidu created false invoices to trigger delivery of certain products to EBM or Alcazar Jr. and thereafter deleting them before they were discovered by Plaintiffs billing and collections department].) Naidu admitted that there was an agreement between himself and moving parties to sell Plaintiff’s stolen goods. (Chavez Decl., ¶¶ 7-10, 16-21, Exs. 6-7.) Further, there are corroborative price drops that fell extremely below market prices. (Chavez Decl., ¶¶ 18-19.) This creates a reasonable inference that moving parties knew about and participated in a conspiracy to steal/buy the foam products at extremely low rates. As a consequence, moving parties may be liable for Naidu’s misrepresentations he made in furtherance of this conspiracy, i.e., the alleged invoices.

Accordingly, moving parties’ motion for summary judgment is DENIED. The alternative motion for adjudication as to this issue is DENIED.

Issues Nos. 2: Misappropriation of Trade Secrets

To establish a cause of action for misappropriation of trade secrets, a plaintiff must establish: 1) plaintiff’s ownership of trade secret; 2) that defendant acquired, disclosed, or used the trade secret through improper means; and 3) damages. (Sargent Fletcher, Inc. v. Able Corp. (2003) 110 Cal.App.4th 1658, 1665; see CACI 4401.)

Moving parties move against the second cause of action on the grounds that they never received Plaintiff’s customer lists and price lists for the sale of scrap foam. (SAC ¶¶ 41-45.) Moving parties present evidence that they never received such information from anyone, including Naidu. (SSMF 21-22; Alcaraz Jr. Decl., ¶ 19.) This meets the initial burden to the second cause of action for misappropriation of trade secrets.

Plaintiff argues that Naidu provided the lists to moving parties, and this comes down to a question of credibility. Plaintiff cites no evidence that Naidu made admissions regarding trade secrets. The video makes no mention of customer lists. (Chavez, Decl., Exs. 6-7.) The Chavez declaration, which relays Naidu’s confession, makes no statement on the customer lists or release of confidential price information. (See Chavez Decl., ¶¶ 1-22.) Therefore, Plaintiff fails to present substantial evidence to create a dispute of material fact as to the trade secrets.

Plaintiff requests a continuance to allow for additional discovery. (CCP § 437c(h).) Plaintiff argues that discovery has been difficult and led to a discovery referee being appointed. There are several outstanding witnesses to be deposed. (von Esch Decl., ¶ 23.) This includes Naidu, Bertha Medina (FF’s vice president and Alcaraz Jr.’s mother) Michelle Escobedo (Alcaraz Jr.’s girlfriend), Michael Lara of M&M Trucking (delivered/picked up significant amounts of the loads at issue). (Ibid.) Additionally, there are issued subpoenas to third parties for banking records.

However, none of the above categories have any apparent bearing on this issue. Plaintiff presents no argument that any of the above sources of discovery would yield any information regarding the theft of trade secrets. The only person who reasonably would have such information is Naidu. He refused to testify at two depositions entirely. Plaintiff makes no proposition on how they would reasonably get such information from Naidu considering his refusal. Further, the Court notes that Plaintiff admits that they intend to drop this claim and the UCL claim and filed a notice motion to do so. (See Opp. at 3, fn. 1.) Therefore, the Court does not find good cause as to allow additional discovery for this issue.

Accordingly, moving parties’ motion for adjudication is GRANTED as to this issue.

Issue No. 3: Intentional Interference with Prospective Economic Advantage

The elements for interference with prospective economic advantage are: (1) the existence of a prospective economic relationship with the probability of future economic benefit to plaintiff; (2) defendant’s knowledge of the relationship and intent to disrupt it; (3) actual disruption of the relationship; (4) caused by the defendant’s wrongful and unjustified conduct; and (5) plaintiff suffered damages as a result. (Youst v. Longo (1987) 43 Cal.3d 64, 71.) Further, the interference must be wrongful by some measure beyond the fact of the interference itself. (Della Penna v. Toyota Motor Sales (1995) 11 Cal.4th 376, 393.) A plaintiff may plead a specific intent to interfere or, alternatively, that defendant knew the interference was certain or substantially certain to occur as a result of its action. (Korea Supply Co., supra, 29 Cal.4th at 1153; see CACI 2202.)

Moving parties move against the fifth cause of action on an identical ground as the second cause of action: that they never received Plaintiff’s customer lists and price lists for the sale of scrap foam, never used such information, and therefore could not have interfered with customer relations. (SSMF 38-41; Alcaraz Jr. Decl., ¶ 19.) They assert that they had no idea Naidu was unauthorized, or that Naidu was absconding with the proceeds. (SSMF 23-37.) Moving parties therefore argue that the purchases could not have been intended to harm or interfere with Plaintiff’s business. However, this does not meet the initial burden as to the intentional interference cause. The basis of the fifth cause of action are both the misappropriation of trade secrets and influencing Naidu to breach his duties to Plaintiff thereby disrupting the Plaintiff-Naidu relationship. (SAC ¶ 64.) Moving parties fail to address this point entirely. Therefore, moving parties have not met their initial burden as to this cause.

Accordingly, moving parties’ motion for adjudication is DENIED as to this issue.

Issue No. 4: UCL Claim

Under the UCL, any “unlawful”, “unfair”, or “fraudulent” business act or practice is deemed to be unfair competition. (State Farm Fire & Casualty v. Superior Court (1996) 45 Cal.App.4th 1093, 1102, criticized on different grounds by Cal-Tech Communications, Inc. v. L.A. Cellular Telephone (1999) 20 Cal.4th 163, 184.)

Moving parties argue that defendants bought and paid for scrap foam dealing with plaintiff’s manager without knowledge of the alleged lack of authority or his part, or knowledge that he was allegedly misappropriating the sales. (SSMF 42-56, 59-60.) They essentially rely on the same arguments as to the fraud cause. There is a dispute of fact over whether moving parties lacked their purported knowledge of either Naidu’s authority to sell or his misappropriation. As discussed above, Plaintiff presents evidence that moving parties had knowledge of the scheme, as shown by Naidu’s admissions, the text communications between Naidu and Alcaraz Jr., and the drastic drops in price far below market value. (See Chavez Decl., ¶¶ 7-18; von Esch Decl., ¶ 3-22.)

Accordingly, moving parties’ motion is DENIED as to this issue.

Issue No. 5: Conversion

“Conversion is the wrongful exercise of dominion over the property of another. The elements of a conversion are: (1) the plaintiff's ownership or right to possession of the property at the time of the conversion; (2) the defendant’s conversion by a wrongful act or disposition of property rights; and (3) damages. It is not necessary that there be a manual taking of the property; it is only necessary to show an assumption of control or ownership over the property, or that the alleged converter has applied the property to his own use.” (Farmers Ins. Exchange v. Zerin (1997) 53 Cal.App.4th 445, 451-452.)

Courts have traditionally refused to recognize as conversion the unauthorized taking of intangible interests that are not merged with, or reflected in, something tangible. (Thrifty-Tel, Inc. v. Bezenek (1996) 46 Cal.App.4th 1559, 1565.) Courts have provided a remedy through conversion for the loss of intangible property interest, but only if those interests are reflected in something tangible that can be physically taken. (Moore v. Regents of the University of California (1990) 51 Cal.3d 120, 134.)

Moving parties move on five interrelated grounds. First, moving parties argue that to the extent that the claim is based on customer/price lists, they never received such information or lists. The Court previously discussed the trade secrets issue and agreed. However, this alone does not defeat the entire cause of action.

Moving parties argue that they had no knowledge of the theft, they believed Naidu had authority to sell the property, that they are innocent BFPs, and that they were purchased in the ordinary course of business. Moving parties meet their initial burden on all these points by providing evidence that they purchased the foam products in the ordinary course of business, dealing with Naidu (a manger), without knowledge of any wrongdoing. (SSMF 62-72, 80-81.)

The same analysis applies as the fraud and UCL claims. Moving parties may meet their initial burden through their declarations denying knowledge, but there is a dispute of fact as to whether they were truly ignorant. Plaintiff relies on the argument and evidence: moving parties had knowledge of the scheme, as shown by Naidu’s admissions, the text communications between Naidu and Alcaraz Jr., and the drastic drops in price far below market value. This necessarily creates a dispute of fact as to each of moving parties’ points. There is a dispute of fact as to whether moving parties are an “innocent third party” or BFP due to their knowledge of the theft/scheme. (See 14A, Cal.Jur.3d, Conversion § 33 ["it is a general rule that an innocent purchaser for value and without notice, actual or constructive, that the vendor had secured the goods by wrongful means is not liable for conversion." (emphasis added)]; accord Oakdale Village Group v. Fong (1996) 43 Cal.App.4th 539, 546.)

Accordingly, moving parties’ motion is DENIED as to this issue.

Issues Nos. 6-10: Remaining Issues Relate to Moving Parties’ Knowledge

Moving parties make similar arguments as to the remaining causes of action. Generally, they argue that each cause of action and claim for punitive damages fail because they had no knowledge that Naidu was allegedly unauthorized to sell the scrap foam or his misappropriation of the sale proceeds. (Mot. at 14-18.) As to each, there is a dispute of fact regarding moving parties’ knowledge of Naidu’s misappropriation of the foam products and their participation in the conspiracy. (See Bank of America National Trust & Saving Assn v. Hill (1937) 9 Cal.2d 495, 499 [alternative to a pleading of conversion]; Penal Code §496(a) [requiring knowledge that the property is stolen]; Casey v. U.S. National Bank Association (2005) 127 Cal.App.4th 1138, 1144 [aiding and abetting requires knowledge that the other person’s conduct constituted a breach of duty]; Civ. Code § 3294(a).)

Accordingly, the motion is DENIED as to these issues.

Moving party is ordered to give notice.


[1] The Court does not find Evid. Code section 1223 applies, since the evidence was not made in furtherance of the conspiracy. The evidence facially shows it was made against the conspiracy after the conspiracy apparently concluded. (Evid. Code § 1223(a), (b).)