Gemini Aluminum Corp. v. California Custom Shapes, Inc

In Gemini Aluminum Corp. v. California Custom Shapes, Inc. (2002) 95 Cal.App.4th 1249, the Court had occasion to discuss the standards applicable in determining whether an award of attorney fees under Civil Code section 3426.4 is appropriate for the alleged institution and prosecution of a bad faith claim for misappropriation of trade secrets. As we noted in Gemini, "the Uniform Trade Secrets Act does not define 'bad faith' as used in Civil Code section 3426.4, and apparently there is no reported California case interpreting the term." (Gemini, supra, 95 Cal.App.4th at p. 1261.) Relying on the legislative history of Civil Code section 3426.4 and a federal decision interpreting this section, we explained that this section "is intended to '"allow a court to award reasonable attorney fees to a prevailing party in specified circumstances as a deterrent to specious claims of misappropriation . . . ." ' . . . 'As to deterrence, . . . it requires conduct more culpable than mere negligence. To be deterrable, conduct must be at least reckless or grossly negligent, if not intentional and willful. Webster's defines specious as, among other things, "apparently right or proper: superficially fair, just, or correct but not so in reality . . . ." Thus, the claim must have been without substance in reality, if not frivolous.' " (Ibid.) We concluded that "'bad faith' for the purposes of Civil Code section 3426.4 requires objective speciousness of the plaintiff's claim, as opposed to frivolousness, and its subjective bad faith in bringing or maintaining the claim." (Gemini, supra, 95 Cal.App.4th at p. 1262.) In Gemini, the Court concluded that the trial court did not abuse its discretion in awarding attorney fees to the defendant and against the plaintiff on a claim for misappropriation of trade secrets. First, we held that the evidence demonstrated that because the alleged trade secret information had no economic value to either the plaintiff or competitors at the time the complaint was initiated, the "case was objectively specious, if not frivolous, from its inception." (Gemini, supra, 95 Cal.App.4th at p. 1263.) As to the plaintiff's bad faith in pursuing the action, we noted not only the lack of economic value in the asserted trade secrets, but also the fact that the defendant pointed out this fact to the plaintiff before trial. (Id. at pp. 1263-1264.) Even so, we noted the plaintiff persisted with the claim through trial and requested a jury instruction on the trade secret claim. (Id. at p. 1264.) The plaintiff's testimony revealed hostility toward the defendant and its principals. (Ibid.) Based upon these facts, we concluded the court did not abuse its discretion in finding both objective speciousness and subjective bad faith on the part of the plaintiff. (Ibid.)