Filed 10/7/14 Becton, Dickinson and Co. v. Superior Court CA4/1

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                    COURT OF APPEAL, FOURTH APPELLATE DISTRICT
                                   DIVISION ONE

                                           STATE OF CALIFORNIA



BECTON, DICKINSON AND                                            D066518
COMPANY,
                                                                 (San Diego County
         Petitioner,                                             Super. Ct. No. 37-2013-00071216-CU-
                                                                 CO-CTL)
         v.

THE SUPERIOR COURT OF SAN
DIEGO COUNTY,

         Respondent;


QUIDEL CORPORATION,

         Real Party in Interest.


         PROCEEDINGS in mandate after superior court granted motion to enforce third

party subpoena. Timothy Taylor, Judge. Petition granted.

         Raymond W. Bertrand, Paul Hastings LLP, for Petitioner.

         No appearance for Respondent.

         Julie R. Trotter, Call & Jenson, for Real party in interest.

         Petitioner Becton, Dickinson and Company (BD) challenges an order granting the

motion of real party in interest Quidel Corporation to compel responses to its subpoena of

BD's business records. BD contends the order compels it to produce documents
containing trade secret information to its direct competitor and seeks to stay the order

until after respondent court hears and decides BD's pending motion for a protective order.

We grant the petition.

                  FACTUAL AND PROCEDURAL BACKGROUND

       Quidel filed a civil suit against its former employee John Andrew Hoffman after

Hoffman resigned from Quidel and began working for Quidel's competitor, BD. BD is

not a party to this action. Quidel and BD both produce and sell a new type of influenza

test and share distributors, customers and "key opinion leaders" (described by Quidel as

doctors and professionals that influence sales of their products). In October 2013 Quidel

filed a complaint against Hoffman asserting a single cause of action for breach of

contract. Quidel alleges Hoffman breached his confidentiality agreement with Quidel by

disclosing or using its confidential information and trade secrets in his employment with

BD.

       The parties have been engaged in discovery since the complaint was filed. On

February 6, 2014, the court entered a protective order (Quidel/Hoffman Protective Order)

allowing either party or a third party to designate documents as "confidential

information" or "confidential-for counsel only." The order does not distinguish between

outside and in-house counsel, and therefore permits attorneys employed by Quidel access

to any information that is designated by Hoffman or a third party, such as BD, as

confidential.1



1      Under the Quidel/Hoffman Protective Order, a document designated as
confidential can lose that designation only if a non-producing party successfully
challenges the designation by motion.

                                             2
       On February 2, 2014, Quidel issued a subpoena to BD seeking the production of

certain business records. BD timely served its objections to the requested documents,

including on the ground that the subpoena sought confidential information protected by

the trade secret privilege. Thereafter BD and Quidel engaged in meet and confer

discussions concerning the production. Throughout those discussions BD maintained its

objection to producing documents containing trade secrets. BD agreed to produce some

of the requested documents and did so in April and June. Quidel was dissatisfied with

the production and on July 16, 2014, filed a motion to compel additional documents

responsive to its subpoena against BD. A hearing on the motion was scheduled for

August 15, 2014.2

       In its motion to compel against BD, Quidel contended BD's production of over

800 pages of documents was insufficient because the documents that were produced were

missing pages and heavily redacted, and also because BD failed to include requested

2       On May 23, 2014, Quidel filed a separate motion to compel production of
documents against Hoffman. In opposition, Hoffman contended Quidel sought the
production of BD's business records containing BD's confidential trade secret
information. Citing a letter he received from BD's counsel cautioning him against
production, Hoffman asserted that producing the requested documents would constitute a
breach of his confidentiality agreement with BD. At the August 8, 2014, hearing on the
motion, the court rejected Hoffman's assertion that the court had to apply a heightened
level of scrutiny to the information requested, stating: "What you're trying to do . . . is
engraft onto the breach of contract case the kind of discovery protections that the
legislature felt were appropriate in trade secret litigation. [Quidel] didn't sue your client
for violating trade secrets. It's a straight breach of contract." At the conclusion of the
hearing the court granted Quidel's motion and ordered Hoffman to produce documents by
August 28, 2014. The order states "Hoffman apparently contends that just because his
new employer thinks the documents sought are secret, he may lawfully resist discovery.
Not so. The court finds that Quidel has requested documents which are or may lead to
admissible evidence, and that Quidel has otherwise justified the demands in question."
Hoffman filed a petition for writ of mandate directing the trial court to vacate the August
8, 2014 order and we issued an order to show cause on September 12, 2014. (Case No.
D066513.)
                                                3
documents. Quidel asserted the Hoffman/Quidel Protective Order negated any concern

BD might have over the disclosure of BD's trade secret or confidential information. In its

opposition to the motion, BD asserted Quidel sought the production of documents that

contained its trade secrets (including, among other things, marketing and sales strategies

for its competing product) and that Quidel failed to meet the heightened showing required

for the discovery of such information. BD also contended the Quidel/Hoffman Protective

Order was not sufficient protection because the order would permit Quidel executives to

view documents containing its trade secrets.

       Before the hearing on Quidel's motion to enforce its subpoena, BD brought a

competing motion for a protective order for the documents sought by the subpoena issued

on February 2, 2014 and a second subpoena issued to it by Quidel on July 18, 2014. BD

contended both subpoenas sought documents containing its confidential trade secret

information. BD argued Quidel had not made the heightened showing required for the

discovery of BD's trade secret information and sought an order relieving it from

disclosure of privileged information. BD set its motion for hearing on the earliest date

available, October 31, 2014.

       At the August 15, 2014 hearing on Quidel's motion to enforce its February 2, 2014

subpoena, BD asked the court to advance the hearing on its motion for a protective order

so that it could be heard before the court ruled on Quidel's motion. The court denied the

request. The court also rejected BD's argument that the information sought was entitled

to trade secret protection, stating "I had this conversation just last week, okay? And I

thought I made my thoughts on that subject quite clear, that you can't [e]ngraft that whole

[trade secret] construct on a straight-up breach-of-contract case."

                                               4
       BD reiterated its concern at the hearing that the Hoffman/Quidel Protective Order

was not sufficient to protect its trade secrets, explaining Quidel's general counsel also

serves as the firm's senior vice president of business development. Therefore, even at the

"confidential-for counsel only" level of protection, a Quidel business executive would

gain access to its confidential information. The court responded by stating that "someone

better make a motion to modify the protective order" and suggested Quidel revise the

Hoffman/Quidel Protective Order to exclude Quidel's general counsel. BD's counsel then

reminded the court it had a motion for a protective order on calendar and again requested

Quidel's motion to compel be deferred until the court ruled on that motion. The court

denied the request.

       After the hearing, the court granted Quidel's motion to compel on the grounds the

documents were discoverable under Code of Civil Procedure section 2017.010. The

order states that to "the extent [BD] believes [Quidel's] request seeks private, privileged,

and confidential commercial, financial, and/or other proprietary business

information . . . , those concerns can be addressed by the [Hoffman/Quidel Protective

Order], which [BD] has failed to utilize." The order directed BD to produce the

requested documents by August 29, 2014.

       On August 26, 2014, BD filed a petition for writ of mandate seeking an immediate

stay of the August 15th order until its motion for protective order is adjudicated. In its

petition, BD contends the court erred by ordering it to produce confidential and trade

secret information without conducting the required balancing test for the discovery of

such information. BD also asserts the current protective order is insufficient to protect its



                                              5
proprietary information because, even at its highest level of protection, Quidel's senior

vice president of business development may view the document production.

       We issued the requested stay temporarily, requested an informal response to the

petition and issued Palma notice. (Palma v. U.S. Industrial Fasteners, Inc. (1984) 36

Cal.3d 171, 178.) Quidel filed an informal response to the petition on September 5, 2014.

                                       DISCUSSION

                                              I

       Evidence Code section 1060 creates a privilege for trade secrets and authorizes the

owner of a trade secret to refuse to disclose the secret "if the allowance of the privilege

will not tend to conceal fraud or otherwise work injustice." In Bridgestone/Firestone,

Inc. v. Superior Court (1992) 7 Cal.App.4th 1384 (Bridgestone) the court of appeal

applied Evidence Code section 1060 in the context of civil discovery. The Bridgestone

court held that it would be error to order disclosure of a trade secret simply because such

information would be discoverable under the general standard for discovery of matter that

" 'appears reasonably calculated to lead to the discovery of admissible evidence.' "

(Bridgestone, supra, at p. 1390.) The standard set forth by Code of Civil Procedure

section 2017.010 applies to matters that are not privileged.3 (Bridgestone, supra, at pp.

1390-1391.)




3       Code of Civil Procedure section 2017.010 provides, in pertinent part: "Unless
otherwise limited by order of the court in accordance with this title, any party may obtain
discovery regarding any matter, not privileged, that is relevant to the subject matter
involved in the pending action or to the determination of any motion made in that action,
if the matter either is itself admissible in evidence or appears reasonably calculated to
lead to the discovery of admissible evidence." (Code Civ. Proc., § 2017.010, emphasis
added.)
                                                6
       Evidence Code section 1060 requires the court to apply a heightened standard

before compelling the disclosure of documents containing trade secrets. (Bridgestone,

supra, 7 Cal.App.4th at p. 1393.) Under this standard, the party claiming the privilege

must first establish the information sought is privileged. (Ibid.) If it does, then the "party

seeking discovery must make a prima facie, particularized showing that the information

sought is relevant and necessary to the proof of, or defense against, a material element of

one or more causes of action presented in the case, and that it is reasonable to conclude

that the information sought is essential to a fair resolution of the lawsuit." (Ibid.) If that

showing is made, the burden shifts to "the holder of the privilege to demonstrate any

claimed disadvantages of a protective order." (Ibid.)

                                              II

       BD contends the respondent court erroneously concluded no trade secrets were at

issue because Quidel's only cause of action against Hoffman was for breach of contract.

As a result, the court incorrectly applied the general standard for discovery of Code of

Civil Procedure section 2017.010 rather than the heightened scrutiny required for

protected trade secrets. We agree the trial court erred by summarily concluding no trade

secrets were at issue and by failing to conduct the heightened review required for the

production of such information.

       Rather than determine if the trade secret privilege applied, the trial court

concluded trade secrets were not at issue because Hoffman's only claim was for breach of

contract. A claim of trade secret privilege, however, is not determined based on the

claims asserted by the plaintiff. (See Bridgestone, supra, 7 Cal.App.4th at p. 1388

[applying trade secret privilege to information sought in wrongful death action based on

                                               7
claim of negligent design and manufacture of tires]; and Citizens of Humanity, LLC v.

Costco Wholesale Corp. (2009) 171 Cal.App.4th 1, 7 [applying privilege in case alleging

the sale of stolen property under Penal Code section 496].)

       Once BD asserted the requested information contained trade secrets, the trial court

was required to determine whether it did.4 (Bridgestone, supra, 7 Cal.App.4th at p.

1393.) If the documents contain protected trade secrets, then disclosure could be

compelled only if Quidel demonstrated the information "is relevant and necessary to the

proof of a material element" of its claim against Hoffman and that the information "is

essential to a fair resolution of the lawsuit." (Bridgestone, supra, at p. 1393.) Here,

rather than conduct this analysis, the court erroneously applied the general standard for

discovery under Code of Civil Procedure section 2017.010.

       The court's finding that any privileged information could be protected by the

Hoffman/Quidel Protective Order was not an adequate substitute for use of the balancing

test required under Evidence Code section 1060 for the disclosure of trade secrets. While

a protective order is relevant to the determination of whether trade secret information is

ultimately discoverable, the party seeking the protected information must first establish

the information is directly relevant and necessary to its claims.5 (Bridgestone, supra, 7

Cal.App.4th at p. 1393.) The court abused its discretion by requiring disclosure of the

documents by BD subject to the Hoffman/Quidel Protective Order without first


4       While we express no opinion on the subject, many of the disputed requests, on
their face, appear to seek information subject to the trade secret privilege. Notably,
Quidel does not dispute the information it seeks is protected.

5     By suggesting the need for modification of the existing order, the court itself
appears to have tacitly recognized its shortcomings.
                                              8
conducting the analysis required for the disclosure of information protected by the trade

secret privilege.

       We also reject Quidel's contentions, set forth in its informal response to BD's writ

petition, that (1) BD's motion for protective order is not relevant to the challenged order

because BD's motion addresses only Quidel's July 18, 2014, subpoena and that (2) BD

waived its right to seek a protective order because it did not seek an order at the outset of

negotiations over the requested documents. Neither of these contentions is supported by

the record before this court. BD's motion for a protective order explicitly refers to both

subpoenas. Additionally, BD did not waive its right to seek a protective order. Rather, it

maintained its objection to producing confidential trade secret information throughout its

negotiations with Quidel.

       Because the relief BD seeks will become moot if the protective order is heard

before this court rules on its petition and because BD's entitlement to relief is clear and

the law well-settled, we conclude a peremptory writ in the first instance is proper. (Code

Civ. Proc., § 1088; Alexander v. Superior Court (1993) 5 Cal.4th 1218, 1222-1223; Ng v.

Superior Court (1992) 4 Cal.4th 29, 35.)




                                              9
                                      DISPOSITION

       Let a writ of mandate issue directing respondent to stay its order of August 15,

2014, until after it has heard and decided petitioner's pending motion for a protective

order. The stay previously issued by this court is vacated.




                                                                                  IRION, J.

WE CONCUR:



              McCONNELL, P. J.



                        BENKE, J.




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