Vitec Elecs. Corp. v. Veris Indus.

Decision Date16 December 2021
Docket NumberG059123,G058864,G058388,G058923
PartiesVITEC ELECTRONICS CORP., Plaintiff and Appellant, v. VERIS INDUSTRIES, LLC et al., Defendants and Appellants.
CourtCalifornia Court of Appeals Court of Appeals


Appeals from judgments and postjudgment orders of the Superior Court of Orange County No. 30-2016-00876606, Melissa R. McCormick and William D. Claster, Judges. Affirmed in part, reversed in part, and remanded with directions.

Business Law Group and Joseph A. Lara for Plaintiff and Appellant.

Barnes & Thornburg, Seth A. Gold, Matthew B. O'Hanlon and L Rachel Lerman for Defendants and Appellants.




In these four consolidated appeals, we affirm an amended judgment, all of the posttrial orders with one exception, and an order granting summary adjudication. We reverse only, in part, a postjudgment order awarding attorney fees.

In this business dispute between corporations, Vitec Electronic Corp. (Vitec) sued Veris Industries, LLC (Veris), Schneider Electric USA, Inc. (Schneider), and Pacific Transformer Corporation (PacTran) (Veris, Schneider, and PacTran are referred to collectively as Defendants). Vitec alleged that Veris and Schneider had breached three contracts, including a nondisclosure agreement, and that Defendants had misappropriated Vitec's trade secrets.

The trial court granted summary adjudication against Vitec on its breach of contract claims. Vitec's misappropriation of trade secrets claim was tried to a jury. At trial, Vitec contended that Veris and Schneider had misappropriated six part drawings for a Vitec product and that PacTran had improperly acquired the part drawings and used them to design and manufacture a product to sell to Veris at a discounted price.

The jury found in favor of Vitec and awarded it damages. Judgment was entered. The trial court granted Defendants' motion for judgment notwithstanding the verdict (JNOV) on the ground substantial evidence did not support the jury's findings that the part drawings were trade secrets. An amended judgment was entered. The trial court granted Defendants' motion for attorney fees based on an attorney fees provision in the nondisclosure agreement. After attorney fees were awarded, a second amended judgment was entered.

Vitec appealed from the amended judgment and from the order awarding attorney fees. In addition to the JNOV, Vitec challenges the order granting summary adjudication and the pretrial orders denying its requests to continue the trial date, reopen discovery, and for leave to amend its complaint and trade secret identification.

Defendants also appealed from the order awarding attorney fees and brought a protective cross-appeal from the judgment entered on the jury verdict.

We affirm the second amended judgment except to the extent it includes an award of attorney fees. The trial court did not err by granting summary adjudication of Vitec's breach of contract claims. The trial court properly exercised its discretion by denying Vitec's requests to continue the trial date, reopen discovery, and for leave to amend its complaint and trade secret identification. We affirm the JNOV because substantial evidence did not support the jury's findings that the six part drawings that were the basis for Vitec's misappropriation of trade secrets cause of action were trade secrets.

We reverse the order awarding attorney fees but only on the ground that the trial court erred by determining the amount of the fee award based on prevailing hourly rates in Portland, Oregon, rather than in Orange County. The scope of remand is limited: We remand with directions to the trial court to determine and consider the hourly rates customarily charged in Orange County for similar legal services and, in the exercise of its discretion, determine a reasonable amount of fees.

We commend Judge Claster, who presided over the trial and decided the posttrial motions, and Judge McCormick, who decided the pretrial motions, for their thorough analysis and for creating excellent records for appellate review.

I. The Parties and the Nondisclosure Agreement

Vitec is a California corporation that designs and manufactures "unique magnetic components" for electronic power systems. Veris is an Oregon limited liability company that sells electronic power systems measuring the amount of energy used by programs. Schneider is a Delaware corporation, and Veris is a wholly owned subsidiary of Schneider. PacTran is a California corporation that designs and manufactures components used in electronic power systems.

Beginning in about 1998, Vitec and Veris began a business relationship in which Vitec built magnetic components for Veris. In May 2006, Vitec and Veris entered into a contract called a confidentiality and nondisclosure agreement (the 2006 NDA) which had, as its stated purpose: "Veris and Vitec intend to explore a business relationship in the course of which either or both parties may disclose certain Proprietary Information as defined hereinafter."

Five provisions of the 2006 NDA are particularly relevant to these appeals:

1. Confidentiality/Nondisclosure. The 2006 NDA has a confidentiality/nondisclosure provision stating in part: "[N]either party shall publish, disseminate nor disclose in any manner to any third party, Proprietary Information disclosed to it either directly or indirectly and each party shall maintain all such information in strictest confidence unless otherwise authorized." We refer to this provision as the Confidentiality Provision. The obligations of the Confidentiality Provision expired two years from the date of the 2006 NDA (i.e., May 2008.)

2. Nonutilization. The 2006 NDA has a nonutilization provision stating in part: "Neither party shall utilize any part of the Proprietary Information provided by the other party pursuant to this Agreement except for exploration of the business relationship for which this Agreement was executed." We refer to this provision as the Nonutilization Provision. The Nonutilization Provision is not subject to the two-year expiration date.

3. Written Amendments. The 2006 NDA has a provision stating it can only be amended "by a signed writing."

4. Attorney Fees. The 2006 NDA has an attorney fees provision stating: "In the event of any dispute with respect to the subject matter of this Agreement, the prevailing party shall be entitled to such party's reasonable attorneys' fees, expenses, and court costs incurred in resolving or settling the dispute (including such fees, expenses and court costs incurred at trial or on appeal)."

5. Choice of Law/Forum Selection. The 2006 NDA has a choice of law/forum selection provision stating: "This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Oregon, excluding principles of conflict of law. For all disputes relating to this Agreement, each of the parties hereto consents to the jurisdiction of the courts of the State of Oregon, and agrees that such courts shall have personal jurisdiction over each of the parties hereto. Venue for all disputes relating to this Agreement shall be only in Multnomah County Circuit Court."

II. Development of Current Sense Transformers and Creation of Part Drawings

When the 2006 NDA was signed, Vitec had been selling Veris a version of a current sense transformer (CST), identified as part No. 57P1699. Current sense transformers are electronic devices that measure current in electronic power systems and assist with power management. Sometime after the 2006 NDA was signed, Vitec began designing another version of the CST for use in Veris's branch circuit power monitoring systems. Veris provided Vitec design inputs reflecting Veris's performance expectations.

Vitec was able to design and manufacture a CST that met Veris's performance expectations. Part drawings of this CST were prepared. Part drawings are similar to or the same as a technical drawings or blueprints.

For three years after the 2006 NDA was signed, Vitec did not convey any confidential information to Veris. In about July 2009, Vitec modified and added more proprietary design aspects to the part drawings of the CST. These modified drawings incorporated the previous design.

III. Proposed New Nondisclosure Agreement and Proposed Supply Agreement

In June 2012, Schneider expressed concern over a "sizeable gap" between the price of Vitec products and price quotations of other suppliers and sought to negotiate a lower price from Vitec for the CST's. Brad Rogers (Vitec's vice-president and general manager) responded in an e-mail stating: "I speculate that the quotes received from the others are lower due to Vitec knowing the full extent of what is required to supply these products as opposed to the belief that others might have a cost advantage. [And] [i]t's unclear to me how others could provide a reasonable quote knowing that the parts were designed by Vitec and are proprietary technology covered under a mutual non-disclosure." Rogers forwarded a copy of the 2006 NDA to Schneider. Rick Anderson, a regional commodity manager at Schneider, reviewed the 2006 NDA and told Veris it had expired.

Schneider sent Vitec a proposed new nondisclosure agreement in May 2014 (the 2014 NDA). The 2014 NDA had a nondisclosure provision similar to the one in the 2006 NDA. Schneider requested that Vitec sign and return the 2014 NDA. No party signed the 2014 NDA.

In August 2014, Vitec sent to both Veris and Schneider a proposed supply agreement (the Supply Agreement) between Vitec and Veris. The Supply Agreement states it was intended to "confirm[] the understanding that Vitec would not sell the CST's that Vitec designed and manufactured for Veris/Schneider to any...

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