California is one of the 47 states to have adopted the Uniform Trade Secrets Act. Among other things, “CUTSA,” as it is sometimes referred to in the Golden State, brought greater clarity to what qualifies as a “trade secret” and “misappropriation” of a trade secret, and it established an enforcement scheme that provides for an award of attorneys' fees to a prevailing party and for potential award of a “royalty” in cases where the aggrieved party cannot prove actual damages.

By the plain language of the statute, CUTSA was intended to take the place of most business tort causes of action that were historically used to address trade secret misappropriation. The term “preemption” is often used to address this concept, but that is technically incorrect because preemption involves the trumping of state law by federal law. More accurately, some courts have used the term “supersession,” or “displacement” of state law. Whatever term is used, the question is whether a victim of trade secret misappropriation pursuing a CUTSA claim may also pursue other business torts such as breach of the duty of loyalty or conversion against the wrongdoer. The California Court of Appeal recently addressed this issue in Angelica Textile Services v. Park to find that CUTSA did not displace a state law claim for conversion of trade secrets, but the court reached that conclusion in a novel manner.

Angelica Textiles, a large-scale laundry business catering to hospitals and other medical facilities, sued one of its former managers, Jaye Park, on a variety of causes of action, including CUTSA, after he left the company to form a competing business. The evidence in the case indicated that Mr. Park had been actively engaged in preparation to open his competing business while still employed by Angelica, and he had criticized the company’s business practices when speaking with customers while still on the company’s payroll. Angelica also contended that Park had improperly taken a variety of proprietary documents at the time of his departure.

The trial court entered summary judgment on Angelica’s claims against Park and his competing business for breach of fiduciary duty, unfair competition, interference with business relations, and breach of contract. The court ruled that these business tort claims were “preempted” by CUTSA because they were based on the same facts and circumstances as the CUTSA claim. The CUTSA claim proceeded to a jury trial, but the jury rendered a defense verdict on the grounds that the documents that Park had allegedly stolen did not meet the statutory definition of a “trade secret.” Angelica appealed the entry of summary judgment on the tort claims but did not attempt to challenge the validity of the jury’s verdict.

The California Court of Appeal reversed the entry of summary judgment. The court noted that the language of CUTSA is quite clear that breach of contract claims based on a misappropriation of trade secrets are never supplanted by the statute, even if those claims are based on the same facts underlying the CUTSA claim. Other business tort claims are displaced by CUTSA only if they depend upon the same facts as the CUTSA claim without other supporting allegations. For example, the Court of Appeal found that Angelica’s claim against Park for breach of fiduciary duty was based on alleged misconduct wholly apart from his alleged misappropriation of trade secrets, including his disparagement of Angelica to its customers while still employed. Therefore, that claim was not preempted.

The Court of Appeal’s rationale for its conclusion that Angelica’s claim for conversion was not displaced by CUTSA is the most interesting aspect of the decision. The jury had concluded that the documents that Park had allegedly purloined on his way out the door did not qualify as “trade secrets.” The Court of Appeal noted that if these documents were not trade secrets then Angelica could not have a claim under CUTSA and, therefore, CUTSA did not displace its common law claim for conversion. The court noted that nothing in the record indicated that these documents, which apparently did not have any actual competitive value, had ever been returned. Thus, the outcome of the ruling was that Angelica technically or theoretically had available a cause of action based on Park’s alleged misappropriation of the documents, but the company had no damages, no right to recover attorneys’ fees, no right to a statutory royalty, and even injunctive relief would be of no value.

This case illustrates once again how important precise pleading can be in a trade secret misappropriation claim, and that great care must be taken to plead all facts that might support a business tort claim outside the scope of CUTSA.

Back to Trade Secrets & Employee Mobility Blog

Search This Blog

Blog Editors

Related Services



Jump to Page


Sign up to receive an email notification when new Trade Secrets & Employee Mobility posts are published:

Privacy Preference Center

When you visit any website, it may store or retrieve information on your browser, mostly in the form of cookies. This information might be about you, your preferences or your device and is mostly used to make the site work as you expect it to. The information does not usually directly identify you, but it can give you a more personalized web experience. Because we respect your right to privacy, you can choose not to allow some types of cookies. Click on the different category headings to find out more and change our default settings. However, blocking some types of cookies may impact your experience of the site and the services we are able to offer.

Strictly Necessary Cookies

These cookies are necessary for the website to function and cannot be switched off in our systems. They are usually only set in response to actions made by you which amount to a request for services, such as setting your privacy preferences, logging in or filling in forms. You can set your browser to block or alert you about these cookies, but some parts of the site will not then work. These cookies do not store any personally identifiable information.

Performance Cookies

These cookies allow us to count visits and traffic sources so we can measure and improve the performance of our site. They help us to know which pages are the most and least popular and see how visitors move around the site. All information these cookies collect is aggregated and therefore anonymous. If you do not allow these cookies we will not know when you have visited our site, and will not be able to monitor its performance.