Self Directed Placement Corp. v. Control Data Corp.

• Decision Date: 10 July 1990
• Docket Number: No. 89-55337,89-55337
• Citation: 908 F.2d 462
• Parties: SELF DIRECTED PLACEMENT CORP., and Charles D. Hoffman, Plaintiffs-Appellants, v. CONTROL DATA CORPORATION, and Control Data Institute, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 462

908 F.2d 462

15 U.S.P.Q.2d 1536

SELF DIRECTED PLACEMENT CORP., and Charles D. Hoffman, Plaintiffs-Appellants, v. CONTROL DATA CORPORATION, and Control Data Institute,

Defendants-Appellees.

No. 89-55337.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted May 10, 1990.

Decided July 10, 1990.

Howard D. Finkelstein, Finkelstein & Associates, San Diego, Cal., for plaintiffs-appellants.

Paul R. Smith and Nanette Farina, Solomon, Ward, Seidenwurm & Smith, San Diego, Cal., Arthur J. Levine and Mark Traphagen, Finnegan, Henderson, Farabow, Garrett & Dunner, Washington, D.C., for defendants-appellees.

Appeal from the United States District Court for the Southern District of California.

Before REINHARDT and LEAVY, Circuit Judges, and THOMPSON, District Judge. ¹

BRUCE R. THOMPSON, Senior District Judge:

Charles D. Hoffman and Self Directed Placement Corporation (Self Directed) appeal from the district court's grant of summary judgment in favor of Control Data Corporation and Control Data Institute (Control Data). ² Self Directed claims that Control Data misappropriated trade secrets and engaged in unfair competition. Self Directed also claims the district court failed to permit adequate discovery before ruling on the summary judgment motion.

STANDARD OF REVIEW

The district court's decision granting summary judgment is reviewed de novo. Hoopa Valley Tribe v. Nevins, 881 F.2d 657, 659 (9th Cir.1989), cert. denied, --- U.S. ----, 110 S.Ct. 1523, 108 L.Ed.2d 763 (1990). Under the de novo standard of review, the reviewing court must determine whether there are any genuine issues of material fact and whether the district court correctly applied the relevant substantive law. Tzung v. State Farm Fire & Casualty Co., 873 F.2d 1338, 1339-40 (9th Cir.1989); Harkins Amusement Enters. v. General Cinema Corp., 850 F.2d 477, 482 (9th Cir.1988), cert. denied, 488 U.S. 1019, 109 S.Ct. 817, 102 L.Ed.2d 806 (1989). Because the district court granted summary judgment in favor of Control Data, we view the facts in the light most favorable to Self Directed. The district court's ruling concerning discovery is reviewed for an abuse of discretion. Herring v. Delta Air Lines, Inc., 894 F.2d 1020, 1021 (9th Cir.1989), cert. denied, --- U.S. ----, 110 S.Ct. 1319, 108 L.Ed.2d 495 (1990).

FACTS

Self Directed was engaged in the business of providing training courses to unemployed Control Data was engaged in the business of providing computer related vocational training courses. During the late 1970's and early 1980's Control Data experienced losses of revenue and difficulty in finding employment positions for its graduates. In 1981, Alvis Swinney, Control Data's chief "trouble shooter" initiated negotiations with Self Directed for the purpose of licensing the Self Directed program to assist Control Data in solving its placement difficulties.

and under-employed individuals. The courses offered by Self Directed were intended to teach students with poor employment histories how to obtain employment. The business had a high success rate and by 1982, the founder and sole shareholder, Charles Hoffman, was grossing over $8,000,000 per year. Self Directed's program of training involved both written and video materials taught by Self Directed trained instructors using Self Directed's Instructor's Manual. Instructors were required to sign an Employee Secrecy Agreement prior to being trained. Students and "outsiders" were not allowed access to the Instructor's Manuals, which Self Directed considered to be confidential business information. However, the more than 30,000 students that attended Self Directed's course were not required to sign any secrecy agreement regarding the program's format or contents.

Following a series of negotiations, the parties agreed that Self Directed would first conduct a "pilot" program for Control Data. This program took place in Control Data's Anaheim facility in November and December of 1981. Lois Trager, an employee of Self Directed who had signed a Secrecy Agreement, was one of the instructors during this pilot program. Alvis Swinney attended part of the Anaheim program and during the program Swinney offered Trager a substantially higher paying job with Control Data. Within a month, Trager left Self Directed to work for Control Data. She did not copy any of the Self Directed manuals prior to leaving nor did she take any of the manuals with her. At Control Data Trager was assigned the task of putting a program together "using SDP, using what [she] did, using what [she] had learned in Anaheim on the program". Soon thereafter, Control Data ceased communications with Self Directed.

Hoffman's complaint, filed on April 16, 1985, listed four claims for relief: (1) copyright infringement of the "Self Directed Placement Corporation Student Handbook"; (2) copyright infringement of the "CDI Training Tape"; (3) violation of trade secret; and (4) fraud. In its jurisdictional statement, plaintiff stated that "[t]his action arises in part under the copyright laws of the United States, ... in part under the laws of the State of California, and in part under the common law of trademarks and unfair competition." In both copyright infringement claims plaintiff alleges:

[s]ince January 1982, and continuously since then, CDC and CDI have been publishing, selling and otherwise marketing their infringing work, and have thereby been engaging in unfair trade practices and unfair competition against SDPC to SDPC's irreparable damage.

Also, in its prayer for relief, plaintiff requests that defendant pay damages sustained by plaintiff as a consequence of defendant's copyright infringement and defendant's unfair trade practices and unfair competition.

Self Directed's counsel thereafter retired and Hoffman was substituted in pro per on January 11, 1988. On September 15, 1988, twelve days before the scheduled September 27th trial, Self Directed engaged new counsel. Up to this point, Self Directed had undertaken little discovery and Self Directed's new counsel immediately requested certain documents relating to damages from Control Data. At an ex parte conference held on September 26, 1988, the magistrate ordered the documents produced within ten days. The next day, the district judge continued the trial to March 7, 1989, and imposed sanctions on Self Directed's counsel for the delay caused to defendant.

Another discovery conference was held on November 4, 1988 and the magistrate ordered Control Data to produce the requested

documents and to file a formal response within 30 days. On December 20, 1988, Control Data produced some of the documents and filed a motion for summary judgment. Ten days later Control Data filed a motion for a protective order. Self Directed responded with a motion to compel production of documents and filed its opposition to Control Data's summary judgment motion. A discovery hearing was set for January 19, 1989. The lower court granted summary judgment on January 17, 1989, in favor of Control Data on Self Directed's claims under the Copyright Act, 17 U.S.C. Sec. 102, et seq., violation of trade secret, and fraud. The copyright and fraud determinations are not being contested by Self Directed. Self Directed is now appealing the trade secret ruling, the lower court's failure to address its unfair competition claim, and the propriety of granting summary judgment while a motion to compel was still pending.

DISCUSSION

I. Pending Discovery Request

The district court's failure to continue the summary judgment motion and permit additional discovery is reviewed for an abuse of discretion. Bryant v. Ford Motor Co., 886 F.2d 1526, 1533 (9th Cir.1989). As a result of discovery conferences held in September and November of 1988, Self Directed received a portion of the information it had requested regarding gross revenues, operating revenues, enrollees and drop-outs from Control Data. After Control Data filed their motion for summary judgment, Self Directed moved for additional production of documents. Before Self Directed received any further discovery, summary judgment was granted.

It is clear from the record that Self Directed's pending motion to compel production of documents was related solely to the issue of damages. The district court's order granting summary judgment for Control Data was rendered on liability. Additional information regarding damages would not have altered the district court's finding of no liability. Thus, the district court did not abuse its discretion by ruling on Control Data's liability before discovery was completed. Century 21 Real Estate Corp. v. Sandlin, 846 F.2d 1175, 1181 (9th Cir.1988).

II. Trade Secret Claim

Self Directed contends that its employment counseling program, which includes some thirty-six elements, should be accorded trade secret protection as the program incorporates "know-how" and "negative know-how" attained through accumulated experience. The alleged trade secrets include such instruction techniques as: the program being conducted on consecutive days, beginning with Wednesday; instructor review and critique of thank you notes; holding a surprise cocktail party prior to the normal ending time on the last day of class; and conducting dress rehearsals for job interviews on the last day of class.

The district court granted summary judgment stating:

Each of these items is either already a matter of common public knowledge or completely disclosed to students taking the SDPC [Self Directed] course. It would be absurd to permit Hoffman to appropriate as his own 'secrets' common pedagogical and job search techniques which would be used in any job placement course. Other characteristics of Hoffman's course were in the public domain because any student taking the course would have access to them.

In reaching the above conclusion, the district court correctly held as a matter of law that the items presented by Control Data, taken either individually or as...