Facts

The facts according to plaintiff's counsel: in May 2005, plaintiff SeaCliff Packaging Inc. hired defendant Larina Lee to work as its sales representative and to help source products from Asia for its business as a distributor of cosmetic packaging and accessories.

According to plaintiff's counsel, in July 2006, SeaCliff discovered that Lee had been directly competing with the company through another distribution company she established. SeaCliff also discovered that Lee had been skimming profits through collaboration with distributors she set up in Korea to act as intermediaries between SeaCliff and the manufacturers of products SeaCliff was buying. When confronted with SeaCliff's discovery of her conduct, Lee resigned from SeaCliff.

According to plaintiff's counsel, subsequent events revealed that despite her resignation from SeaCliff, Lee retained substantial amounts of the company's confidential customer information and trade secrets for her own use.

The facts according to defense counsel: plaintiff SeaCliff Packaging Inc. ("SeaCliff") and Defendant Anahi, Inc. ("Anahi") and Larina Lee ("Lee") conducted business together from July 1, 2005 through July 31, 2006 pursuant to a written agreement. The agreement called for Lee, through Anahi, to set up Brokers in Korea to obtain cosmetic packaging supplies for SeaCliff. In turn, SeaCliff agreed to pay Anahi basic pay and commissions on accounts that Lee handled. Lee generated more than $4.4 million in gross sales for SeaCliff.

PLAINTIFF'S CONTENTIONS:
SeaCliff contended that Lee breached her contract to work exclusively for SeaCliff, as well as the fiduciary duties she owed to SeaCliff as its agent. In addition, Lee's post-resignation retention and use of SeaCliff's customer information constituted willful and malicious misappropriation of trade secrets, thereby entitling SeaCliff to its attorney's fees pursuant to statute.

DEFENDANT'S CONTENTIONS:
Defendants Anahi and Lee claimed that SeaCliff breached the written contract by failing to pay all commissions due and owing to Anahi. Anahi and Lee claimed that SeaCliff's breach of the contract was in bad faith. Lee and Anahi further claimed that Lee was not SeaCliff's exclusive agent. Anahi and Lee further claimed that SeaCliff, Scott Simon, and Vonda Simon, interfered with Anahi and Lee's prospective economic advantage, violated California’s Business And Professions Code, as well as slandered the defendants.

Damages

SeaCliff sought to recover the secret profits Lee made while working for SeaCliff, as well as a permanent injunction preventing Lee from using SeaCliff's trade secrets. Lee counterclaimed for unpaid commissions exceeding $109,000 and unspecified damages for slander.

Result

SeaCliff's verdict of $744,000 in compensatory damages and $125,000 in punitive damages. Cross-complainant Lee recovered nothing. At subsequent bench trial of SeaCliff's claim for misappropriation of trade secrets, the court issued a permanent injunction against Lee for the return of electronic and documentary customer information, and found that her misappropriation was willful and malicious thereby entitling SeaCliff to recover a percentage of the attorney fees as an element of its costs.

Other Information

FILING DATE: Sept. 12, 2006.

Deliberation

seven hours

Length

six days