ITT Telecom Products Corp. v. Dooley

• Decision Date: 26 September 1989
• Docket Number: No. H003501,H003501
• Citation: 214 Cal.App.3d 307,262 Cal.Rptr. 773
• Court: California Court of Appeals Court of Appeals
• Parties: , 58 USLW 2260 ITT TELECOM PRODUCTS CORPORATION, Plaintiff and Appellant, v. Gerald DOOLEY, et al., Defendant and Respondent.

Page 773

262 Cal.Rptr. 773

214 Cal.App.3d 307, 58 USLW 2260

ITT TELECOM PRODUCTS CORPORATION, Plaintiff and Appellant, v. Gerald DOOLEY, et al., Defendant and Respondent.

No. H003501.

Court of Appeal, Sixth District, California.

Sept. 26, 1989.

Review Denied Dec. 21, 1989.

Morrison & Foerster, Robert D. Raven, Gary M. Rinck, Andrew E. Monach and Peter L. Shaw, San Francisco, for plaintiff and appellant.

Caputo, Liccardo, Rossi, Sturges & McNeil, Salvador A. Liccardo, R. Donald McNeil, Robert A. Franklin and Robert C. Colyar, San Jose, for defendant and respondent.

AGLIANO, Presiding Justice.

1. Introduction

Does the statutory privilege for statements made in judicial proceedings (Civ.Code, § 47, subd. 2) preclude liability for an otherwise wrongful disclosure of trade secrets? Plaintiff ITT Telecom Products Corporation filed the instant suit for damages alleging its former employee, defendant Gerald Dooley, had violated contractual and other duties of confidentiality. Dooley moved for summary judgment or summary adjudication based on the privilege, asserting his disclosures were made as a consultant to a party involved in litigation with ITT. The trial court granted Dooley's motion for summary judgment and ITT has appealed.

As explained below, we will reverse, holding the privilege does not apply to the voluntary disclosure of trade secrets in violation of a contract of confidentiality.

2. Scope of review

"Since a summary judgment motion raises only questions of law regarding the construction and effect of the supporting and opposing papers, we independently review them on appeal, applying the same three-step analysis required of the trial court. (Code Civ.Proc., § 437c....)" (AARTS Productions, Inc. v. Crocker National Bank (1986) 179 Cal.App.3d 1061, 1064, 225 Cal.Rptr. 203.) "First, we identify the issues framed by the pleadings...." (Ibid.) Second, we identify which, if any, material facts are truly undisputed by comparing the separate statements of facts and supporting evidence in the motion, the opposition, and in any reply. (Code Civ.Proc., § 437c, subd. (b).) Third, disregarding disputed facts, we consider whether the motion has "establish[ed] a complete defense or otherwise show[n] there is no factual basis for relief on any theory reasonably contemplated by the opponent's pleading." (AARTS Productions, Inc., supra, at p. 1064, 225 Cal.Rptr. 203.) ¹

3. The pleadings

ITT alleged that after July 1982 and before September 1983 Dooley disclosed confidential information and trade secrets as a paid consultant to Intercontinental De Communicaciones Por Satelite, S.A., a Panamanian corporation ("Intercomsa"). The disclosures were concurrent with ITT's October 1982 demand for arbitration with Intercomsa and Intercomsa's April 1983 lawsuit against ITT concerning an allegedly defective telephone switching system purchased from ITT, a Delaware corporation.

ITT's appeal concerns only two of its causes of action. One alleged that Dooley breached a written contract not to disclose confidential information obtained during his employment. The other alleged misappropriation of ITT's trade secrets and confidential, proprietary information. ² ITT sought compensatory damages and punitive damages for the tort. ³

4. Material, undisputed facts

In 1967 in Ohio, Dooley signed an "employee's agreement to assign inventions" with ITT's predecessor which provided in pertinent part: "I further agree that I will not, except as required in the conduct of the Company's business or as authorized in writing on behalf of the Company, publish or disclose, during such term of employment or subsequent thereto, any secret or confidential knowledge concerning any invention or other matter relating to the Company's business which I may in any way acquire by reason of my employment by the Company."

In December 1977, ITT retained Dooley after acquiring the assets, including contract rights, of Dooley's former employer. Dooley left ITT's employ in July 1982.

After Intercomsa became dissatisfied with an international telephone switching system it had purchased from ITT, in October 1982 ITT demanded arbitration in New York. Intercomsa contacted a telecommunications consulting firm to assist its arbitration defense.

In October 1982, the consulting firm hired Dooley for $600 to $800 per day as an expert consultant. Dooley traveled to Panama for a week in November 1982 to consult with Intercomsa. Intercomsa wanted to know whether the switching system conformed to ITT's product descriptions and specifications and the contract between Intercomsa and ITT. Dooley answered eleven of Intercomsa's questions by a written report dated November 19, 1982. Dooley also instructed Intercomsa on traffic engineering of telephone calls based on his general education, his work experience with ITT and previous employers, and his knowledge of particular product developments by ITT.

Dooley supplied Intercomsa with other information about the system which he obtained from another former employee of ITT who wished to remain anonymous. Dooley could not recall if his informant was still employed by ITT when he obtained this information.

Dooley discussed his report with Intercomsa's attorneys in Washington, D.C. in December 1982 or January 1983.

Dooley provided Intercomsa with information for the purpose of assisting it in litigation with ITT. In April 1983, Intercomsa filed a complaint against ITT in a Florida federal district court. On February 1, 1984, the district court granted Intercomsa's motion precluding ITT from deposing Dooley or obtaining his report because he was not a designated trial witness, although he was designated an expert consultant. ⁴ This action was filed on February 28, 1984. The following day, ITT filed an ex parte motion to expedite Dooley's deposition and production of his report.

5. Overview of statutory privilege for statements made in judicial proceedings

In Financial Corp. of America v. Wilburn (1987) 189 Cal.App.3d 764, 234 Cal.Rptr. 653, this court examined the nature of the privilege for statements made in judicial proceedings. ⁵ We explained in part: "By statute an action for defamation cannot be predicated on certain privileged oral or written statements. 'A privileged publication or broadcast is one made ... 2. In any ... (2) judicial proceeding....' (Civ.Code, § 47.)" (Id. at p. 771, 234 Cal.Rptr. 653.) "This privilege is absolute in that it applies regardless of whether a statement was uttered with malice or bad faith. ( [Citation]; Thornton v. Rhoden [ (1966) ] 245 Cal.App.2d 80, 93 [53 Cal.Rptr. 706, 23 A.L.R.3d 1152]; [citation].) However, its applicability depends on whether the statement was 'made in' a 'judicial proceeding.' Albertson [ v. Raboff (1956) ] 46 Cal.2d 375 , faced the question whether a notice of lis pendens was privileged. The court determined the privilege should be given a broad application in view of its underlying policy, holding: 'It is our opinion that the privilege applies to any publication, such as the recordation of a notice of lis pendens, that is required [citation] or permitted [citation] by law in the course of a judicial proceeding to achieve the objects of the litigation, even though the publication is made outside the courtroom and no function of the court or its officers is invoked. [Citation.] Thus, it is not limited to the pleadings, the oral or written evidence, to publications in open court or in briefs or affidavits. If the publication has a reasonable relation to the action and is permitted by law, the absolute privilege attaches.' (Id., at pp. 380-381 .) The court supported this expansive reading of the statutory privilege by reference to common-law absolute privileges described in the Restatement of Torts sections 585-589 which protect certain actors in judicial proceedings against defamation actions. (Id., at pp. 378, 381 .)" (189 Cal.App.3d 764, 771-772, 234 Cal.Rptr. 653.)

At issue in Financial Corp. of America v. Wilburn, supra, 189 Cal.App.3d 764, 234 Cal.Rptr. 653, was whether statements by an attorney preceding (id. at pp. 777-778, 234 Cal.Rptr. 653) and during litigation (id. at pp. 774-777, 234 Cal.Rptr. 653) were privileged against claims of intentional interference with economic advantage and abuse of process. We noted that the statutory privilege has been applied to statements made by actual and prospective nonparty witnesses in litigation and other quasi-judicial proceedings. (Id. at pp. 772, 777-778, 234 Cal.Rptr. 653; cf. Ribas v. Clark (1985) 38 Cal.3d 355, 364-365, 212 Cal.Rptr. 143, 696 P.2d 637; Bernstein v. Alameda etc. Med. Assn. (1956) 139 Cal.App.2d 241, 245-247, 293 P.2d 862; Thornton v. Rhoden, supra, 245 Cal.App.2d 80, 93, 99, 53 Cal.Rptr. 706; Kachig v. Boothe (1971) 22 Cal.App.3d 626, 641, 99 Cal.Rptr. 393; Block v. Sacramento Clinical Labs, Inc. (1982) 131 Cal.App.3d 386, 393-394, 182 Cal.Rptr. 438; McClatchy Newspapers, Inc. v. Superior Court (1987) 189 Cal.App.3d 961, 971, 973-974, 234 Cal.Rptr. 702; Carden v. Getzoff (1987) 190 Cal.App.3d 907, 913-916, 235 Cal.Rptr. 698.) ⁶

6. Were the statements made in a judicial proceeding?

We preliminarily dispose of several of ITT's contentions regarding the applicability of the privilege to Dooley's disclosures to Intercomsa. Here, as in Wilburn, "[t]he dispute between [the parties] is fueled by the tension in the law between liberal and restrictive applications of the privilege." (189 Cal.App.3d 764, 773, 234 Cal.Rptr. 653.) Examples of liberal applications are Albertson v. Raboff, supra, 46 Cal.2d 375, 295 P.2d 405, and Thornton v. Rhoden, supra, 245 Cal.App.2d 80, 53 Cal.Rptr. 706, and of restrictive applications are Bradley v. Hartford Acc. & Indemn. Co. (1973) 30 Cal.App.3d 818, 106 Cal.Rptr. 718, and its progeny, such as Barbary Coast Furniture Co. v. Sjolie (1985) 167 Cal.App.3d 319, 334, 213 Cal.Rptr. 168. (Wilburn, supra, 189 Cal.App.3d 764, 772-774, 234 Cal.Rptr. 653.)

ITT's...