Finders v. Medina
| Decision Date | 19 October 2021 |
| Docket Number | B298590 |
| Court | California Court of Appeals Court of Appeals |
| Parties | SMILE FINDERS et al., Plaintiffs and Appellants, v. CHRYSTAL MEDINA et al., Defendants and Respondents. |
SMILE FINDERS et al., Plaintiffs and Appellants,
v.
CHRYSTAL MEDINA et al., Defendants and Respondents.
B298590
California Court of Appeals, Second District, Seventh Division
October 19, 2021
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County No. BC492238, William A. MacLaughlin, Judge. Affirmed in part, reversed in part and remanded with directions.
Lewis Brisbois Bisgaard & Smith, Jeffry A. Miller, Wendy S. Dowse, Craig Holden and Robert M. Collins for Plaintiffs and Appellants Smile Finders, Soleimani Dental Corporation, Soheil Soleimani DMD Corporation, S. Alexander Soleimani Dental Corporation, S.A. Soleimani Dental Corporation and Dental Management Services, LP.
Atabek & Associates and Jon A. Atabek for Defendants and Respondents Chrystal Medina and Genwell, Inc.
Baranov & Wittenberg and Michael M. Baranov for Defendants and Respondents Houman Baratian, Baratian Dental Corporation, and Shallen Price.
PERLUSS, P. J.
Six affiliated dental companies- Smile Finders, a licensed dental referral company; Soheil Soleimani DMD Corporation, Soheil Soleimani Dental Corporation, S. Alexander Soleimani Dental Corporation and S.A. Soleimani Dental Corporation (collectively Soleimani Dental Corporations); and Dental Management Services, LP (DMS)-appeal the judgment entered in their trade secret and breach of contract lawsuit against Dr. Houman Baratian, a dentist who had worked at one of the dental offices owned by the Soleimani Dental Corporations and then opened a competing professional office, and several related individuals and entities. Smile Finders contends the trial court erred in granting a motion for nonsuit precluding its claim for lost profits for misappropriation of its trade secrets, and all six affiliated dental companies-Smile Finders, DMS and the Soleimani Dental Corporations (collectively the Soleimani parties)-contend the court erred in granting the nonsuit motion as to their breach of contract claims against Baratian and two former employees of Smile Finders and DMS. We affirm in part and reverse in part with instructions to conduct a new trial as to certain of the Soleimani parties' breach of contract claims.
FACTUAL AND PROCEDURAL BACKGROUND
1. The Parties to the Lawsuit and Appeal
The Soleimani Dental Corporations, owned by Dr. Soheil Alexander Soleimani, operate a total of eight dental offices. Smile Finders functions as the marketing arm of the affiliated companies generating and providing referrals exclusively to the Soleimani Corporations. DMS provides management services to the Soleimani Dental Corporations.
On September 14, 2012 the Soleimani parties filed an unverified complaint, on February 5, 2013 a first amended complaint, and on September 6, 2013 the operative second amended complaint for injunctive relief and damages alleging causes of action for misappropriation of trade secrets, breach of contract and several related torts. The second amended complaint named as defendants in the misappropriation cause of action Baratian, Baratian Dental Corporation, Chrystal Medina, the former marketing director of Smile Finders who left Smile Finders to work for Baratian, and Genwell, Inc., a company founded by Medina. Baratian, Medina and Shallen Price, a former employee of Smile Finders and DMS, were named as defendants in the breach of contract cause of action. (Baratian, Baratian Dental Corporation, Medina, Genwell and Price, the only defendants involved with this appeal, are referred to collectively as the Baratian parties.)[1] Each of the causes of action was brought on behalf of all six of the Soleimani parties.
Baratian, who started working as an independent contractor with Soleimani in 2007, [2] signed a new contract for services with DMS in April 2011. Article 6 of the contract, titled Proprietary Rights of DMS and All DMS and Affiliated Entities, expressly applied "with equal force and effect to DMS and any related organizations, including but not limited to DMS LP, S. Alexander Soleimani Dental Corp., Soheil Soleimani DMD Corp., Soleimani Dental Corp., S.A. Soleimani Dental Corp, or Smile Finders." The contract protected DMS and its affiliated entities' confidential and proprietary information, including "customer lists, customer information, names, addresses and information relating to leads, lists of leads, names, addresses and telephone numbers of referral sources, . . . marketing information, methods of operation, . . . and all other information of independent economic value to DMS." Baratian agreed he would not "directly or indirectly, either during the term of this contractual relationship with DMS or thereafter, disclose or use the Confidential Information other than in the business of or as directed by DMS, without the prior written consent of DMS." He also agreed not to use the confidential information for a period of three years following termination of his relationship with DMS
"to either directly or indirectly solicit, or take away, or attempt to solicit, or take away any of the patients of DMS, either for Dentist or for any other person, firm or corporation."
Medina and Price also signed confidentiality agreements as a term of their employment. Medina's agreement, signed in 2003, was between her and all six affiliated dental entities. Price's agreement was with Smile Finders, her employer until she transferred to DMS in 2011.[3] The agreements, in substantially similar language, protected any "trade secrets, as that term is defined by the law," and "any and all information concerning any database or contact names [and] any resources which employer uses to promote the business," and specifically identified as confidential information "[t]he names and addresses of Employer's contact and referral sources, and clients and prospective clients from whom Employee has solicited business while in the employ of the Employer, and all other confidential information relating to those contact and referral sources and clients."
2. Misappropriation of Smile Finders's Company List
Smile Finders generates referrals to the individual dental offices owned by the Soleimani Dental Corporations primarily through employer-sponsored corporate health fairs (nonexclusive events that other health care providers attend) and dental wellness (exclusive) events. Smile Finders employees (bookers) attempt to arrange both types of marketing opportunities at
medium- and large-size companies, while other Smile Finders employees (field representatives) actually conduct the events. Contact information (the business's name and address and the contact person's email and telephone number) for individuals at companies that might be interested in hosting such events are entered into a confidential company or client list, which Soleimani described as "our secret sauce that gets us in and gets us patients." By 2012 the company list had approximately 12, 000 entries. Soleimani estimated it took approximately 100, 000 hours to develop, maintain and update the list. The jury found in response to special verdict questions-and it is undisputed on appeal-that the company list is a trade secret, owned by Smile Finders, with actual or potential independent economic value.
In March 2012, while Baratian was still working at one of the Soleimani Dental Corporations offices, he asked Medina to leave Smile Finders and come to work with him at a new dental practice. In their discussions about creating a new team, Baratian asked Medina to bring with her the contact information she had access to as Smile Finders's marketing director. After initially declining Baratian's offers, Medina agreed to work with him; and the two entered into a contract on April 12, 2012 (effective June 1, 2012) for Medina to "set up and supervise a marketing campaign/team to market and sell dental work." Their agreement compensated Medina with a fixed monthly salary and an escalating share of the revenues generated at the new practice. Medina left Smile Finders on April 30, 2012.
In anticipation of her new position in marketing for Baratian's dental practice, and at Baratian's request, Medina accessed Smile Finders's confidential database (that is, the company list) and downloaded the names of companies and
contact individuals, emails and phone numbers and the number of employees at each business. Medina described the information she took as "publicly available" and claimed not to have removed "internal notes." The information was then uploaded into Baratian's computer system at his new practice.
Baratian also recruited several other employees in the affiliated Soleimani entities for positions in his new practice, including Sayda Lopez, the office manager at the dental office where Baratian practiced. Baratian asked Lopez to bring patient information available to her at her current job to his new practice. Baratian also asked Price several months before starting his competing enterprise to explain Trojan, DMS's on-line insurance tracking service. Price did so and printed and delivered to Baratian several pages of Trojan reports in connection with her explanation.[4]
Baratian's independent contractor relationship with DMS was terminated in April 2012 after Soleimani learned Baratian was taking confidential information in anticipation of creating a competing dental practice. Throughout the summer and into the fall of 2012, as Baratian started and then grew his new practice, Medina performed marketing services for him, using, in part, the information she had downloaded from Smile Finders. She also used Smile Finders's training materials while working for Baratian.
3. Causation and Damages
The Soleimani parties' general theory of the case was that the Baratian parties, through use of the information on the company list misappropriated by Medina, were able to access companies and host wellness events that otherwise would...
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