Facts

Plaintiff Specialized Bicycle Components, Inc. ("Specialized"), headquartered in Morgan Hills, California, claimed that two former employees, Robert Choi and Barley Forsman, left Specialized and formed a rival bicycle company, Volagi, LLC. Specialized contended that Choi and Forsman breached their employment agreements which precluded them from competing or preparing to compete while employed at Specialized.

Specialized sued Volagi, Choi and Forsman for breach of contract, interference with contracts, statutory unfair competition (Cal. Bus. & Prof. Code Section 17200), and theft/misappropriation of trade secrets. Specialized later amended its Complaint to add four new causes of action – breach of the duty of loyalty, breach of fiduciary duty, and "aiding and abetting" these alleged breaches – but "voluntarily" dismissed all four of these new causes of action one week before Trial.

During the Trial, the Court granted defendants' motion for nonsuit on Specialized's cause of action alleging misappropriation of trade secrets.

During the Trial, Specialized dismissed its causes of action alleging interference with contracts and unfair competition (Section 17200).

Accordingly, the only cause of action that made it to the Jury was Specialized's single cause of action alleging that Mr. Choi and Mr. Forsman breached their employment contracts with Specialized. No claims against Volagi survived before the case went to the Jury.

PLAINTIFF'S CONTENTIONS:
Plaintiff's counsel argued that the contracts of Choi and Forsman stated that employees were not to participate in or assist in any "demonstrably anticipated business" that is a current or possible supplier, customer or competitor of Specialized.

Plaintiff's counsel contended that Choi and Forsman failed to tell Specialized that they were going to manufacture bicycles when they quit their jobs. Plaintiff's counsel contended that Volagi bikes incorporated Specialized's ideas. Specialized contended that Choi took sales territory "call reports," and its 2012 product plan with him when he resigned his employment with Specialized. Plaintiff's counsel contended that Choi and Forsman started work at another company, Volagi, while still drawing paychecks from Specialized.

Plaintiff's counsel further contended that months prior to leaving Forsman sent an email while still at Specialized showing a design for a bike was would compete with Specialized.

DEFENDANTS' CONTENTIONS:
Defendants' counsel contended that Choi merely took information he created. Even if Choi should not have taken the information, it was of little value since it was available on the Internet.

Defendants' counsel further contended that the bikes produced by Volagi are not unique and share design elements with over 20 other bikes on the market. Defendants' counsel contended that Specialized's lawsuit was brought in bad faith to stifle competition and unlawfully tie Defendants up in Court and force them to incur significant legal expenses defending themselves against Specialized's frivolous and anti-competitive lawsuit. Defendants' counsel further contended that Specialized did not own Choi and Forsman's brains, or any idea that might pop into their heads while employed by Specialized, and that California law specifically permits current employees to make plans to compete directly so long as such planning does not harm or damage their current employer, which was the case here.

Settlement Discussions

Demand: Specialized demanded that defendants assign their bike patent and design to Specialized, that defendants redesign their bike, and payment of attorney fees incurred by Specialized in this action. Offer: Defendants offered to change the color scheme of their bikes and to pay Specialized a modest sum towards its attorneys' fees incurred in the action.

Damages

Specialized sought compensatory damages and the ownership and/or assignment of Defendants' bicycle patents. Specialized sought repayment of approximately $80,000 from Choi and Forsman's salaries while at Specialized, as well as unjust enrichment, lost profits and royalties on all future bike sales. Specialized asked the Jury, alternatively, for (1) $42,000 of "lost royalties" or (2) disgorgement of about $80,000 of Choi and Forsman's salaries while employed by Specialized, or (3) nominal damages on the one surviving breach of contract claim. Specialized sought attorney fees under Choi and Forsman's contracts. Defendants will seek recovery of their legal expenses from Specialized under the employment contracts as prevailing parties, and for Specialized's bad faith trade secret misappropriation cause of action pursuant to Civil Code § 3426.4.

Result

The Jury found that Choi breached his employment contract and unanimously rejected claims against Forsman. The Jury awarded only $1 in damages against Choi only. The Jury's Verdict of $1 was only against Robert Choi for breach of contract, the only one of the eight Specialized causes of action that made it to the Jury. Specialized's claim of breach of contract as to Barley Forsman was rejected by the Jury 12-0. Trade secret cause of action against Choi, Forsman and Volagi LLC- all of the defendants - was non-suited by Judge Woodhouse at the close of evidence, triggering possible attorney fees recovery by all defendants.

Other Information

Judge Woodhouse will decide on post-trial motion who was the prevailing party as between Choi and Specialized by assessing which side achieved its litigation goals.

Deliberation

three hours

Poll

11-1 against Choi, 12-0 for Forsman

Length

two weeks