Volume X No. 2 October 2003 REPORT

ASSOCIATION OF BUSINESS TRIAL LAWYERSSAN DIEGO

REPORTVolume X No. 2 October 2003

When Do Trade SecretsTrump the FirstAmendment?by Anthony M. Stiegler, Esq. and Andrea Bitar, Esq. of Cooley

Godward, LLP

On August 25, 2003,the California Supreme Court decided DVD Copy

Control Assn., Inc. v. Bunner(2003 WL 21999000). Thiscase raised an important con-stitutional issue, addressingthe tension between FirstAmendment free speechrights and the rights of atrade secret owner to protectits information throughinjunctive relief. The Courtheld that a party’s tradesecret rights can trump anadversary’s First Amend-ment free speech rights whenan injunction is necessary toprohibit a publication ofthose trade secrets on theInternet. The decision willhave far-reaching effects intrade secret litigation.

BackgroundThe digitization of movie

and music content opened anew technological era in thestorage and distribution of

virtually perfect copies on DVDs (digital versatilediscs) and DVD enabled computers. DVDs arecapable of storing more than 4.7 gigabytes of dataand easily hold full-length motion pictures. The

VIEW FROM THE BENCH

From Pleading ThroughVerdict with the Hon.Ronald S. Prager

Judge Ronald S. Pragerhas served on the San Diego Superior Courtbench since 1989. He is anindependent calendar judgehandling solely civil litiga-tion matters. He was gra-cious enough to offer theABTL Report the followingthoughts on his approach tocases, from pleading chal-lenges through trial.

How would you describeyour approach to demur-rers and other pleadingchallenges?

Much of what I can and can’t do is, obviously,controlled by the law. Generally speaking, though,I prefer not to have the case get bogged down atthe pleading stage. It usually doesn’t do the partiesa lot of good to be having third and fourth amend-

InsidePresident’s Column by Hon. J. Richard Haden … … … p. 2

Jury Instructions Meet Plain Englishby London Meservy … … … … … p. 2

Enforcing Pre-Dispute Arbitration Clauses: When Are TheyUnconscionable by Charles Evendorff … … … … … p. 3

Trial Reminders by James J. Brosnahan … … … … p. 4

Andrea Bitar Hon. Ronald S. Prager

Anthony M. Steigler

(See “Prager” on page 5)

(See “DVD” on page 7)

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President’s Columnby Hon. J. Richard Haden

In September, legendarytrial attorney James Brosnahan spoke to us on thefour key components of a trial: jury selection, cross-examination, demonstrative evidence, and final

argument. He prepared anoutstanding pamphlet withhis “list of reminders” on eachtopic. We are proud to repub-lish that list in this issue.

Our third ABTL/LitigationSection “Brown Bag Lunchwith a Judge” was withFederal Magistrate LeoPappas, and the next isscheduled with Ninth CircuitCourt of Appeal Circuit JudgeMargaret McKeown on

October 28. Our Vice President, CharlesBerwanger, has more information on this event.More of these informative and enjoyable lunchesare planned for the future.

On October 28, a panel of Superior Court Judges,chaired by our Presiding Judge Rick Strauss, will dis-cuss what is happening in the civil courts downtown.Judge Mike Bollman will answer questions about hissettlement program; and Judges Janis Sammartino,Bill Nevitt and I will talk about our IndependentCalendar Departments.

November 1 is the Red Boudreau Dinner whichABTL cosponsors. This year, our longtime Boardmember Chuck Dick will receive the BroderickAward. This is a great evening for a worthy causeand we hope you can attend.

Mark your calendars for “John and AbigailAdams” on December 8. Spouses and older chil-dren might enjoy this program and are welcome.For next year, our Program Chair Robin Woffordhas already scheduled a program on Bias (just intime for MCLE) with prominent consultant JacobHerring, and a fascinating evening with distin-guished trial attorney Carol Handler.

As our year draws to a close, we begin to nominatenext year’s Board of Directors. If you have a nominee,please let any of our Board members know.

We look forward to seeing you at our next meeting.

Jury Instructions MeetPlain Englishby London Meservy, Esq. of Paul Hastings Janofsky and Walker LLP

California’s civil juryinstructions have been completely overhauled inan effort to demystify andmodernize arcane language.Partly in response to wide-spread criticism of the ver-dict in the O.J. Simpson dou-ble murder trial, a BlueRibbon Commission on JurySystem Improvement wascreated by the CaliforniaState Judicial Council. TheCommission recommendedthat new civil and criminaljury instructions be createdthat accurately reflect thelaw in a more easily understood manner.

On July 16, 2003, the Judicial Council adopted acourt rule strongly encouraging the use of the newJudicial Council of California Civil Jury Instructions(“CACI”) and making the CACI the official civil juryinstructions of the State of California.Before this rulewas adopted, the Book of Approved Jury Instructions(“BAJI”) had been the standard jury instructionsused in California state courts since the 1940’s. Incontrast to the legalese-riddled BAJI instructions,the CACI instructions emphasize plain, straightfor-ward language.

The CACI instructions were drafted by a 29-member task force appointed by the JudicialCouncil in 1997. The goal of the task force was toensure that juries understand and apply the lawcorrectly when deliberating. To meet this goal, theCACI instructions were written in “plain English”designed to make the law easier for juries tounderstand. Rather than simply revising theBAJI instructions, the task force began their workfrom scratch.

Judge Michael B. Orfield, a member of the taskforce, commented that the new jury instructionseliminated double negatives and focused on main-taining a consistent style throughout the 800 newcivil jury instructions. The instructions were alsodrafted in a manner that facilitates the use of the

(See “Plain English” on page 12)

Hon. J. Richard Haden London Meservy

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It is no secret that manybusinesses prefer to arbitrate disputes, whilemany plaintiffs would rather tell their story to thejury and hope for a large monetary verdict. As aresult, businesses who often find themselves asdefendants-employers, telephone and credit cardcompanies, contractors-often insert arbitrationclauses in their contracts. But, when a plaintiffsues in court anyway, the court is faced with thequestion: Is this arbitration clause enforceable?

The answer to that question depends partly onwhether the clause is unconscionable. In the lastcouple of years, a number of California state andNinth Circuit cases have examined pre-disputearbitration agreements to determine uncon-scionability. These decisions demonstrate thatarbitration is most often compelled where busi-nesses seek merely to direct disputes to arbitra-tion – rather than obtain other advantages, suchas limiting remedies or barring class actions.Additionally, giving the presumptive plaintiff ameaningful opportunity to opt-out of the arbitra-tion agreement can serve to insulate it from afinding of unconscionability.

One of the most important California decisionson unconscionability in pre-dispute mandatoryarbitration clauses is Armendariz v. Found.Health Psychcare Servc., Inc., 24 Cal.4th 83(2000). In Armendariz, the California SupremeCourt analyzed an arbitration clause thatrequired employees, as a condition of employ-ment, to bring all claims related to termination ofemployment to arbitration, while permitting theemployer to bring suit in court. The clause alsoexcluded damages that would otherwise be avail-able under the California Fair Employment andHousing Act (“FEHA”). In reversing an order com-pelling arbitration, the California Supreme Courtfound the clause unconscionable and refused toenforce it.

The California Supreme Court noted thatunconscionability under California law has both aprocedural and substantive element. Proceduralunconscionability focuses on oppression or sur-

Enforcing Pre-Dispute Arbitration Clauses: When AreThey Unconscionable?by Charles Evendorff, Esq. of Morrison & Foerster

prise due to unequal bargaining power, while sub-stantive unconscionability relates to whether theterms of the agreement are “overly harsh” or “one-sided.” See Armendariz, 24Cal.4th at 114. “Both [must]be present in order for a courtto exercise its discretion torefuse to enforce a contract orclause under the doctrine ofunconscionability.” See id.But substantive and proce-dural unconscionability neednot be present in the samedegree, “the more substan-tively oppressive the contractterm, the less evidence of pro-cedural unconscionability isrequired to come to the conclusion that the termis unenforceable, and vice versa.” See id.

While this analysis might seem simple, it isoften extremely fact intensive. As a result, reviewof recent precedent is instructive in determiningwhether a given clause will be held enforceable.Because generally applicable state-law contractdefenses, such as unconscionability, may renderarbitration clauses unenforceable under theFederal Arbitration Act (“FAA”), the followingNinth Circuit decisions analyze California law.

One important caveat – a number of the mostimportant decisions relating to unconscionabilityoccur in the employment context. But the applica-bility of these cases to many employment disputesmay soon be called into question, becauseCalifornia Assembly Bill 1715 is waiting for thegovernor’s signature. AB 1715 would invalidatearbitration clauses in agreements betweenemployers and employees that relate to employ-ment practices covered by the FEHA, and that arerequired as a condition of employment or contin-ued employment. Regardless, the decisions havebroader applicability, and often are (and still willbe) cited as precedent by courts analyzing uncon-scionability in non-employment related disputes,where the parties to the agreement have unequal

(See “Pre-Dispute” on page 10)

Charles Evendorff

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Trial Remindersby James J. Brosnahan, Esq. of Morrison & Foerster LLP

The following lists oftrial reminders are taken from materials distrib-uted by James J. Brosnahan at his September 8,2003 presentation to the Association of Business

Trial Laywers (San Diego).They are reprinted here withthe kind permission of Mr.Brosnahan.

Jury Selection1. Assemble and read

materials, including newspa-pers, from the area where thecase will be tried.

2. Pay attention to conversa-tions with people in the venue.

3. Consider a survey ofpublic opinion.

4. Be absolutely sure you have determined theprecise procedures to be used by this judge in theprocess of jury selection.

5. When you are visiting the courthouse on pre-trial motions, take the time to go down the halland look at some juries.

6. Read jury verdicts within the venue forresults.

7. Most important, do a case analysis to deter-mine what kind of jurors should be eliminated orretained.Who are the parties in the case? Who arethe key witnesses? What are key issues? Fromthis analysis, you can then determine what kindsof people are likely to be favorable or unfavorable.

8. Consider using a questionnaire, which theprospective jurors fill out in their own hand.Judges much more frequently allow such ques-tionnaires now.

9. Be sure you understand the procedures foreliminating a juror for cause and the exercise ofperemptory challenges. A particular judge canmodify both.

10. Never use the last challenge.

Cross-Examination1. Use short, simple, leading questions with four

to six words. “You wrote the letter, didn’t you?”2. Refrain from using open-ended questions

such as, “Why?”

3. When impeaching a witness with a priorinconsistent statement, consider using thephrase, “Did you give this answer to this ques-tion?” You then read the question, the answer andstop. Simplicity is the essence of good impeach-ment. Breaking the questions to their smallestparts very often will increase chances of successand add to the dramatic flow.

4. Before trial, make a thorough personalsearch of the case files looking for cross-examina-tion material.

5. As a general rule, impeach on major points.An exception would be the cross-examination ofan accountant, where precise detail work isimportant.

6. Impeach with a prior inconsistent statementonly when the chances of success are good. A priorstatement in the handwriting of the witnesswould be a prime example.

7. Foreclose all explanations that the witnessmight give before confronting with the main pointor impeaching material.

8. Plot out possible responses that may be givenduring the key areas of the cross-examination andframe questions that can be used depending onthe answer.

9. Don’t overestimate the impact of a felony con-viction because jurors sometimes discount them.

10. Once you have impeached the witness andgained a major advantage, stop and sit down.

Demonstrative Evidence1, Consider preparation of large charts with

boxes and arrows for cases involving businesstransactions and the flow of money.

2. Give careful consideration to what colors youwant to use in your demonstrative evidence, quietsubdued pastels or inflammatory primary colors.

3. Consider presenting your documents onpower point.

4. Consider using an ELMO, which allows youto put any document or photograph on the faceand will project the image onto a screen in thecourtroom.

5. If you use blow ups of key documents, try notto let the number exceed seven or eight to facili-tate ease of handling in the courtroom.

6. The practice of giving copies to the jury, whileless used than in former years and actually notallowed by some judges, is still helpful when deal-ing with a key document.

7. Keep experiments in the courtroom to an

(See “Trial Reminders” on page 6)

James J. Brosnahan

5

PragerContinued from page 1

ed complaints. Although there are certainly somedemurrers that deserve to be granted withoutleave to amend, I generally don’t like to take ahypertechnical view of pleadings. I am inclined togive the plaintiff the benefit of the doubt at thepleading stage, and to await the development ofthe evidence and possible disposition, if appropri-ate, at the summary judgment stage.

How do you like to handle discovery dis-putes?

I don’t allow parties to file discovery motionswithout first meeting and conferring among them-selves and appearing before me ex parte. I findthat, between meeting and conferring and the exparte process, about 98 % of discovery disputes canbe resolved. Not only does this approach get fasterresults, but I feel that the quality of decision I canrender on discovery disputes is better if I get achance to see the attorneys face to face in an exparte. Ex partes offer a good forum for me to learnabout a case, and to try to get a feeling for the trueburdens of discovery and for possible practicalsolutions. For example, if a party is seeking docu-ments going back 10 years, I might order that doc-uments for 3 years be produced, without prejudiceto the party asking for additional years later upona reasonable showing. I genuinely enjoy workingface to face with attorneys, and find that doing soallows the court and the parties to find practicalways to streamline the proceedings for the benefitof all concerned. I find that written motions tend tobe useful mostly in particularly complex situa-tions, such as complex privilege issues. Even incomplex cases, however, I almost never refer mat-ters to discovery referees. I tend to deemphasizethe use of sanctions, and emphasize compliance. Itend to reserve sanctions for situations where oneparty is being truly obstructionist, and nothingelse has seemed to work.

Do you have any advice concerning sum-mary judgment motions?

Summary judgment is a fairly drastic measure,and places a heavy burden on the moving party toshow that there is no triable issue of fact. It istherefore exceedingly important for the movingparty to make it easy for the judge and staff toquickly find the important parts of important doc-uments, especially in motions with voluminousdocuments. The judge and staff don’t have a lot oftime to search for the needles in your haystack.

For example, attorneys should almost always useexhibit tabs, rather than just separating exhibitswith colored paper. Also, underline or highlightthe relevant passages. It is very convincing for ajudge to read a contention in the papers, turn tothe evidence, and see the contention backed up inblack and white. When it comes to oral argument- on summary judgment or anything else - I real-ly admire lawyers who can keep their mouthsshut and let other side complete their argumentswithout interrupting. Not only is this the politething to do, but to me it shows that the lawyer hasconfidence in his position.

How do you approach motions in limine?My approach at trial is always to try to maxi-

mize the good use of juror’s time. I encouragemotions in limine because they are a good way toget issues out of the way before the jury is called.Generally, I handle arguments on in liminemotions in chambers, starting by eliminating theeasy ones then moving to the harder ones. We willgo on record occasionally to memorialize rulingsand to give attorneys a chance to preserve theirobjections. I also invite oral in limine motions to theextent that additional issues become apparent aswe go through the argument process. With the par-ties’ consent, I will often conduct a settlement con-ference before, during or after in limine motions.

How do you handle voir dire?I start by giving the usual questions to the jury

in a very time efficient manner, eliciting a greatdeal of information rather quickly. For attorneyvoir dire, I like to give the attorneys broad scope,but not too much time. I generally allow about 20to 30 minutes of voir dire per side, with exceptionsfor particularly complex cases. Longer voir diretends to become tedious for the jurors. I have theattorneys voir dire all 32 jurors at once, whichrequires them to ask most questions of the panelas a whole. I rarely permit written questionnaires,except in cases with very sensitive issues.

Can you describe your style as a trialjudge?

At trial, I really like to keep things movingalong so that we don’t waste the jurors’ time. Itend not to take an active role; for example, I sel-dom make sua sponte objections or question wit-nesses myself. On rare occasions, I will interjectquestions of my own when necessary to breaksome kind of a log jam. I encourage attorneys to doeverything they can to keep things moving,including having a binder of witness exhibits

(See “Prager” on page 6)

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absolute minimum because they are dangerousand because they can have an inappropriatelygreat importance in the jury’s mind, especially ifthey go wrong.

8. Every case calls for the use of chronologies,key dates displayed for the jury’s convenience.

9. The judge, with an actual trip that the jurytakes, will occasionally allow examination of thepremises. More often, models may be used as longas they are substantially similar to the actualpremises. Video recreations are now common andhave a tremendous effect in many cases.

10. Limit the information on any one chart orblow up and be sure that it is readable at the dis-tance the jurors will be from the piece of demon-strative evidence. Eighty percent of demonstra-tive evidence is unreadable and too busy.

Final Argument1. The usual sequence is the plaintiff first, the

defendant second and then plaintiff ’s rebuttal.Rebuttal is supposed to be limited to new pointsraised in the defense, but is rarely so limited.

2. In order to neutralize the rebuttal argumentby the plaintiff, the defendant can pose a series ofquestions to plaintiff ’s counsel during the defenseargument. You have to be careful doing this but itcan be effective.

3.Time limitations are sometimes imposed by ajudge but usually after consultation with counseland usually reflecting appropriate amounts oftime given the length of the trial and the complex-ity of the material.

4. Many judges will allow the reading of plead-ings, even an indictment. When in doubt on anyprocedures, be sure to ask the judge first.

5. It is crucial to discuss the law and mostjudges will allow discussions of the instructions.Occasionally the instructions will precede theargument, which makes it easier to discuss theinstructions because the jury has already heardthem. If the instructions are to follow, the phrase,“I believe his/her honor will instruct you that . . .”is permissible. In some courts, if you ask first, youmay be able to show some language on a boardthat comes from an instruction.

6. A special verdict should be discussed with thejury and don’t be afraid to tell them exactly whatyou want them to do. “We are asking you to say ‘No’here . . . We are asking you to say ‘Yes’ here . . .”

7. Prepare your argument thoroughly before thetrial begins. Start thinking about what will be inyour final argument when you first get the case.Such thoughts help to focus the discovery and wit-ness interviews. If it is not going to be in the finalargument, it is probably not very important.

8. Preparing yourself for final argument is avery important part of your own self-teaching.Don’t be afraid to practice your final argument outloud in front of one or two friends or colleagues.Invariably they will tell you they do not under-stand a certain part of your position. In general,don’t be afraid to work on your speaking voice.Actors spend years training their voice. So shouldtrial lawyers.Take a dictating machine and try outpart of your argument. Then listen to it. Shouldyou pause more? Are you as clear as you can be?Don’t hesitate to study books on rhetoric for vari-ous rhetorical devices that can be used. Makethem your own. Before giving the final argument,take out all of your notes on the jury and rereadthem very carefully. Who are you talking to?Knowing you audience is the first rule of rhetoricand a final argument is nothing but rhetoric.

9. Structure and content of final argumentvary. But it is helpful to start with a recitation ofthe key legal elements. Even, and perhaps espe-cially, when those legal arguments cut againstyour case, it is better for you to discuss them andexplain them with confidence than to try to ignorethem and attempt to tiptoe past them. The jurywill make an effort to put the law together withthe facts so you had better discuss the law.Marshalling the evidence can be helpful; there arethirty-two of these; there are eleven of those; andsix times the defendant did this. Go easy on therhetoric. It can work if very appropriate and veryshort. You may wish to have a blow up page of tes-timony prepared by the court reporter and show itto the jury to let them see the exact words thatwere used by the witness.

10. First and foremost, be yourself. It is trueyou can watch other trial lawyers and borrowfrom their styles, especially if they present thingsin a similar way to you, but you have to developyour own style. s

Trial RemindersContinued from page 4

always available at the witness stand, and tomake sure that they always have witnesses avail-able so that there is no dead time. s

PragerContinued from page 5

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DVDContinued from page 1

motion picture industry recognized the risk ofwidespread piracy and deployed a technical pro-tection system to prevent users from making anddistributing digital copies of movies.

Toshiba and Matsushita Electric Industrial Co.,Ltd. developed the Content Scrambling System(“CSS”), which is a digital encryption systememploying an algorithm and a set of master “keys”to encrypt the contents of a DVD. All DVD playersaccess the content by using a decryption code com-prised of integrated master keys and an algorithmincorporated into all DVD players. The decryptionsoftware codes permit access, but not the manipu-lation or copying, of the DVD’s content.

The motion picture, computer and consumerelectronics industries adopted and began licens-ing the CSS standard and technology in 1996.Under the terms of the license agreement,licensees were obligated to maintain the confiden-tiality of the proprietary CSS algorithm and mas-ter keys and were prohibited from reverse engi-

neering the CSS code. The industries establishedthe DVD Copy Control Association (DVD CCA)and charged it with the responsibility for granti-ng and administering the CSS licenses.

In 1999, a 15 year old Norwegian, JonJohansen, acquired the proprietary CSS programand codes by reverse engineering software creat-ed by a DVD CCA licensee, Xing TechnologyCorporation. Using the code culled from this con-tractually prohibited reverse engineering,Johansen wrote “DeCSS”, which is a complemen-tary decryption code to CSS. DeCSS enables usersto freely copy and distribute encrypted content,circumventing the industries’ technical barriers.Johansen then posted the source code for DeCSSon an Internet Web Site, where it was widely re-published, including on the website maintainedby Defendant Andrew Bunner.

The LitigationUpon discovering DeCSS, the DVD CCA and

the Motion Picture Association sent notices to website operators hosting sites that posted DeCSS


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demanding the removal of the program. Manywebsite operators, including Bunner, declinedDVD CCA’s demands, which led the DVD CCA tofile its lawsuit against several website operators,including Bunner, alleging trade secret misappro-priation. The suit sought only injunctive relief torequire that DeCSS be removed from websites, toenjoin the further use, copying and distribution ofDeCSS, and to prohibit links to other sites dis-playing DeCSS. The trial court granted DVDCCA’s motion for a preliminary injunction enjoin-ing Bunner from “posting or otherwise disclosingor distributing, on their Websites, or elsewhere,the DeCSS program, the master keys or algo-rithms of the Content Scrambling System….” Thetrial court declined to enjoin Defendants fromlinking to other websites that contained theDeCSS program because the order would havebeen overbroad and burdensome.

The trial court based its injunction on DVDCCA’s proof that it was likely to succeed on its tradesecret claim under California Civil Code §3426 et.

seq. The court found that (1) the CSS technologycontained protectable trade secrets because itderived independent economic value from its secre-cy and because DVD CCA took reasonable steps tomaintain its secrecy, (2) Jorgensen obtained thetrade secrets through improper means, by reverseengineering them in violation of the XingTechnology license agreement, (3) Bunner and theother defendants knew, or should have known, thatJohansen acquired the trade secrets by impropermeans when they posted DeCSS on their websites,(4) the trade secret status had not been destroyedby posting DeCSS on the Internet and (5) DVDCCA would suffer irreparable harm if the injunc-tion was not granted.

Bunner appealed and the Court of Appealreversed. The appellate court assumed that theDVD CCA was likely to prevail on its trade secretclaim, but held that the injunction violated theFirst Amendment because DeCSS was “purespeech” under the First Amendment and theinjunction was an invalid prior restraint.

The California Supreme Court reversed and(See “DVD” on page 9)

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Higgs Fletcher & Mack619-236-1551/www.higgslaw.com

9


remanded, holding that the preliminary injunc-tion was content neutral and was issued to protecta legitimate property interest in DVD CCA’s tradesecret information, rather than to suppress thecontent of Bunner’s communications. Althoughthe Court characterized its holding as “narrow,”the Court strongly emphasized the public policiesunderlying California’s Trade Secret Act (to pro-mote development and commercial ethics and toprotect the fruits of the trade secret owner’s labor)and undertook a thorough analysis of its reason-ing that will have far-reaching effects in tradesecret litigation.

AnalysisAs a threshold question, the Court questioned

whether computer code is protectable speechunder the First Amendment. The Court quicklydetermined that it is; while only a select group ofcomputer programmers may actually understandthe content expressed through a code language,the Court held that computer code is nevertheless“an expressive means for the exchange of informa-tion and ideas about computer information….”

Next, the Court examined what level of scruti-ny should be applied to the preliminary injunctionas a restriction on protectable speech. Under FirstAmendment analysis, content-based restrictionsare subject to heightened scrutiny, while content-neutral restrictions are subject to a lesser level ofscrutiny. The Court held that the Superior Court’sinjunction was content-neutral because the basisfor the order was not the subject matter of thecommunications or disagreement with Bunner’sviewpoint, but rather that Bunner’s communica-tions interfered with the DVD CCA’s efforts tomaintain the secrecy of the CSS technology.

The Court further explained that content-neu-tral restrictions are examined to determine if they“burden no more speech than necessary to serve asignificant government interest”. The Court wenton to note that the preliminary injunction bur-dened speech no more than necessary because thetotal protection from improper disclosure is theonly way for trade secrets to retain that status,and Bunner knew (or should have known) that theCSS trade secrets were acquired by impropermeans. The Court held that protecting tradesecrets with injunctions serves at least three fun-damental governmental interests, including pro-tecting the fruits of the owner’s labor, creating an

incentive to innovate, and maintaining standardsof commercial ethics. The Court’s emphasis onthese three critical policies is a strong signal toCalifornia business interests that Californiacourts will take the enforcement of trade secretrights seriously.

The Court then examined whether the priorrestraint doctrine barred the issuance of the pre-liminary injunction. Prior restraints are viewedas “the most serious and the least tolerableinfringement on First Amendment rights”because they forbid communications in advance ofactual speech. The Court dealt with this issuesummarily, noting that the United StatesSupreme Court recently found that only content-based restrictions, rather than content-neutralrestrictions, are subject to the prior restraintanalysis. As the Bunner communications werecontent-neutral, the Court reasoned no priorrestraint analysis was necessary.

Last, the Court addressed Bunner’s claim thatthe preliminary injunction violated his rightsunder Article I, Section 2 of the CaliforniaConstitution. Though in some cases the CaliforniaConstitution provides more or different protec-tions than those of the United StatesConstitution, the Court held that in this circum-stance the analysis would be the same, and thusthe preliminary injunction did not violate theCalifornia Constitution speech protections.

Justice Moreno’s ConcurrenceThe Court did express one significant caveat to

its holding, which Justice Moreno expanded uponin great length in his concurrence. The Court’sholding assumed that “the trial court properlyissued the injunction under California’s tradesecret law.” On remand, the court directed theCourt of Appeal to independently examine therecord on this issue and to vacate the injunction ifthe DVD CCA could not satisfy its burden of proof.

Justice Moreno, while concurring in the major-ity’s holding that the “First Amendment does notcategorically prohibit preliminary injunctions toenjoin the publication of trade secrets,” took issuewith the majority’s assumption that the injunc-tion had been properly issued in the first place.Justice Moreno said that it was appropriate andnecessary for the Supreme Court to examine thepropriety of the preliminary injunction. Further,because those injunctions were (in Justice


10

Pre-DisputeContinued from page 3

the company instituted its arbitration program.Circuit City had provided current employees witha simple opt out form, gave them thirty dayswhether to decide to participate in the arbitrationscheme, and assured them that they would not bepenalized should they choose to opt-out. As aresult, Circuit City’s arbitration agreement wasnot procedurally unconscionable as applied toAhmed and Najd. Because a contract must beboth procedurally and substantively uncon-scionable, the court found the agreement enforce-able against the two employees.

Ting v. Consumer Action – Bars on ClassActions

In Ting, AT&T’s customer agreement was chal-lenged by plaintiffs acting as private attorneysgeneral under the California Consumer LegalRemedies and Unfair Practices Acts. See Ting v.Consumer Action, 319 F.3d 1126 (9th Cir. 2003).The agreement limited the rights and remedies ofAT&T’s customers in disputes with the company.Most importantly for the current discussion, itmandated binding arbitration, banned all class-wide dispute resolution, and contained a secrecyprovision for all arbitration proceedings.

AT&T mailed the agreement in two separatemailings. Approximately 18 million customersreceived it in an envelope containing their month-ly bill, with no statement on the outside of theenvelope noting that a new customer agreementwas contained inside. Another 42 million cus-tomers received the agreement in a mailing withother materials in an envelope stating “ATTEN-TION: Important information concerning yourAT&T service enclosed.” See id., at 1134. Theagreement informed customers that, by continu-ing to use or pay for AT&T’s services, they wereaccepting the terms of the agreement. If the cus-tomer did not want to accept the agreement, theironly option was to call a toll-free number and can-cel their AT&T service.

Because the customer agreement was a con-tract of adhesion, the court found it procedurallyunconscionable. Interestingly, AT&T argued thatits customers had the option of rejecting theagreement and switching to Verizon, the thirdlargest carrier.Verizon did not have an arbitrationclause in its agreement. But, after noting that theavailability of alternative sources of supply do not

(See “Pre-Dispute” on page 11)

bargaining power. Moreover, it remains to be seenwhether the law will be found compatible with thepreemptive pro-arbitration policies of the FAA.

The Circuit City Line of Cases – mutuality,fee splitting, and opt-out

Circuit City, perhaps much to its dismay, hasbeen instrumental in defining the boundaries ofunconscionable arbitration agreements. TheCircuit City v. Adams cases include two NinthCircuit decisions and a decision from the UnitedStates Supreme Court. The major decision forpurposes of unconscionability is the last one,known as Adams III. See Circuit City Stores, Inc.v.Adams (Adams III), 279 F.3d 889 (9th Cir. 2002).

In Adams III, the court found Circuit City’sarbitration agreement with its employee, SaintClair Adams, procedurally unconscionablebecause it was a contract of adhesion: a standardform contract drafted by the party with superiorbargaining power, and offered on a take it or leaveit basis. The court, citing the California SupremeCourt in Armendariz, noted that signing theagreement was a prerequisite to employment –and that few employees are in a position to refusea job offer because of an arbitration agreement.

The court also found the agreement substan-tively unconscionable. Particularly troubling wasthe fact that it required employees to arbitratedisputes against the company, but did not obligatethe company to arbitrate disputes againstemployees. The agreement also required theemployee to split the arbitrator’s fees with CircuitCity. The court found this circumstance “alonewould render an arbitration agreement unen-forceable.” See Adams III, 279 F.3d at 894. Finally,the court held that the agreement’s limitation ondamages and one year statute of limitations onarbitrating claims were also substantively uncon-scionable.

Nonetheless, following Adams III, the NinthCircuit found essentially the same Circuit Cityarbitration agreement enforceable in two deci-sions. The difference? In Circuit City v. Ahmedand Circuit City v. Najd, the employees wereallowed to opt out of the arbitration program. SeeCircuit City Stores, Inc. v. Ahmed, 283 F.3d 1198(9th Cir. 2002); Circuit City Stores, Inc. v. Najd,294 F.3d 1104 (9th Cir. 2002). Both Ahmed andNajd were current Circuit City employees when

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Pre-DisputeContinued from page 10

to initial the clause, which clearly and conspicu-ously stated that it waived the right to a jury. Asa result, the buyers had only shown a low level, ifany, of procedural unconscionability. Thus, a highlevel of substantive unconscionability was neces-sary to invalidate the agreement.

On the substantive unconscionability side, theagreement required the referee’s fees (estimatedat up to $600 an hour) be split between the buy-ers and Woodside.The court noted that “where theplaintiff is attempting to seek redress for the vio-lation of a statutory or constitutional right, anyprovision requiring him to pay costs in excess ofthose incident to normal litigation is invalid.”Woodside, 107 Cal. App. 4th at 733 (citingArmendariz, 24 Cal.4th at 110-111). But the buy-ers in Woodside were not seeking to vindicatesuch rights. Moreover, they did not present evi-dence that the fees they were likely to pay in thereference were far greater than those they wouldaccrue in litigation – especially given that it wasroutine for courts to appoint a special master orreferee to handle pretrial matters in complex con-struction litigation. Finally, the plaintiffs did notdemonstrate that they could not pay any addition-al expenses of a judicial referee.

In a respite for business interests, the courtfound the judicial reference provisions enforce-able. The court noted frankly that businesses pre-fer to have consumer cases heard by a referee orarbitrator because they believe that the plaintiff ’srecovery will be less than a jury would award. Butit found nothing wrong with that because “[t]hereis nothing unconscionable in requiring a party toa contract to give up the possibility of obtaining awindfall from a jury irresponsibly generous withsomeone else’s money.” See id., 107 Cal. App. 4that 735.

And In ConclusionIt is perhaps a fundamental of human nature to

push boundaries. But, in the context of pre-disputemandatory arbitration agreements, seeking toomuch often means getting nothing. Thus, in draft-ing arbitration clauses, businesses need to be cog-nizant of what they want – a relatively quickmethod of resolving disputes, or the upper hand. s

necessarily affect the procedural unconscionabili-ty analysis under California law, the court dis-cussed the fact that AT&T responded to customercomplaints with a letter stating that all majorlong distance carriers have arbitration provisionsin their service agreements – in contrast to itsargument to the court. Thus, “if consumers hadmeaningful choices, AT&T intentionally dissuad-ed its own customers from seeking them.” Id., 319F.3d at 1149.

The court also found ostensibly mutual clausesin the arbitration agreement substantively uncon-scionable. Both the bar on class actions and confi-dentiality requirements applied to AT&T and itscustomers. But the court noted that it could notimagine an instance where AT&T would bring aclass action against its customers.

Likewise, while the clause requiring the arbi-tration proceedings to remain confidential wasfacially neutral, the court found that confidential-ity provisions generally favor companies overindividuals – based on the “repeat player” effectthat results from companies continually arbitrat-ing the same claims. Because of the “repeat play-er” effect, AT&T would increasingly gain knowl-edge about how to negotiate or defend variousclaims under its agreement, while its customerswere denied a similar opportunity and unable toobtain information needed to build a case of inten-tional misconduct or unlawful discrimination.

Woodside Homes – Sometimes Fee SplittingWorks and Courts do Balance

Woodside Homes (“Woodside”) developed tracthomes. Its standard sales contract required home-buyers to submit disputes relating to the condi-tion, design, or construction of the home to judicialreference pursuant to California Code of CivilProcedure sections 638 and 641 through 645.1. Asthe Woodside Homes court noted, binding judicialreference “is substantially similar to nonjudicialarbitration, and a similar approach is thereforejustified in enforcing the enforceability of the pro-visions.” Woodside Homes of California, Inc. v.Superior Court, 107 Cal. App. 4th 723, 727 (2003).

The court found that the buyers presented noevidence that Woodside would not have negotiat-ed the arbitration provision had they refused toaccept it. Moreover, Woodside required the buyers

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Plain EnglishContinued from page 2

parties’ names to avoid the possibility of confusionand prejudice during deliberations.

The CACI also contain almost 200 special ver-dict forms. Rather than grouping all of theseforms together at the end of the instructions, eachof these special verdict forms is located at the endof its respective section. The task force tried tomatch the content of a special verdict form exact-ly to the elements of the cause of action set forthin the jury instructions.

Critics argue that the new CACI instructionsresult in a “dumbing down” of the law. Critics alsonote that jury instructions are often based onstatutory language and that translating a statuteinto “plain English” is too risky; if the statutorylanguage is not translated into the new juryinstruction correctly, a verdict based on thatinstruction could easily be overturned on appeal.

Judge Orfield believes that any such criticism isoutweighed by the CACI instructions’ purpose andbenefits of educating jurors. Judge Orfield dis-agrees that the new CACI instructions will openthe door to appeals from jury verdicts because eachinstruction is directly based upon either statutorylanguage or the express text of published opinions.Judge Orfield stressed that the task force did notattempt to rewrite the law; rather, the task forcesought to develop instructions which presented thelaw in an understandable fashion while maintain-ing its intended meaning.

However, in a recent panel presentation beforethe San Diego County Bar Association JudgeOrfield admitted that the CACI instructions willcontinue to be a work in progress overseen by theAdvisory Committee on Civil Jury Instructions.Another panelist, Rick L. Seabolt, a partner atHancock, Rothert & Bunshoft in San Francisco,confirmed this by pointing out that since theadoption of CACI, Instruction 430 is already inneed of change because of a recent Supreme Courtdecision. Instruction 430 defines causation basedon the substantial factor test; however, in Junethe California Supreme Court held that causationshould be measured instead by a “but for” test.Diner v. Sweet (2003) 30 Cal.4th 1232.

Harvey R. Levine of Levine, Steinberg, Miller &Huver noted that the arrival of CACI will increasethe amount of time judges and attorneys spendarguing about jury instructions. Two sets of jury

instructions create the occasion for attorneys toargue about whether BAJI or CACI should apply.Judge Orfield responded that judges will preventthis by stating a preference at the beginning ofthe trial. Mr. Levine was otherwise largely compli-mentary of CACI, especially the new burden ofproof instructions which appear below.

Examples of CACI instructions compared toBAJI instructions are provided below:

CACICACI 200. Obligation toProve-More Likely TrueThan Not True:

When I tell you that aparty must provesomething, I mean thatthe party mustpersuade you, by theevidence presented incourt, that what he orshe is trying to prove ismore likely to be truethan not true. This issometimes referred toas “the burden of proof.”After weighing all ofthe evidence, if youcannot decide whethera party has satisfiedthe burden of proof, youmust conclude that theparty did not prove thatfact. You shouldconsider all theevidence that applies tothat fact, no matterwhich party producedthe evidence. Incriminal trials, theprosecution must provefacts showing that thedefendant is guiltybeyond a reasonabledoubt. But in civiltrials, such as this one,the party who isrequired to prove a factneed only prove thatthe fact is more likely tobe true than not true.

BAJIBAJI 2.60. Burden ofProof and Preponderanceof Evidence:

Plaintiff is seekingdamages based upon [a]claim[s] of _______.Plaintiff has the burdenof proving by apreponderance of theevidence all of the factsnecessary to establish:

[The essential elementsof [each separate] [the]claim.The essentialelements of [the] [eachseparate] claim [is] [are]set forth elsewhere inthese instructions. Inaddition to theseessential elements,plaintiff has the burdenof proving by apreponderance of theevidence all of the factsnecessary to establishthe nature and extent ofthe [damages] [injuries]claimed to have beensuffered, the elements ofplaintiff’s damage andthe amount thereof.] Thedefendant has theburden of proving by apreponderance of theevidence all of the factsnecessary toestablish:____________.“Preponderance of theevidence” means


13


CACI 201. More LikelyTrue-Clear andConvincing Proof:

In this case, there aresome specific facts thatmust be proved by thehigher standard of clearand convincingevidence. This meansthe party mustpersuade you that it ishighly probable thatthe fact is true. I willtell you specificallywhich of the facts mustbe proved by clear andconvincing evidence. Allthe other facts will beproved if they are morelikely to be true thannot true.

evidence that has moreconvincing force thanthat opposed to it. If theevidence is so evenlybalanced that you areunable to say that theevidence on either side ofan issue preponderates,your finding on thatissue must be againstthe party who had theburden of proving it.Youshould consider all of theevidence bearing uponevery issue regardless ofwho produced it.

BAJI 2.62. Burden ofProof and Clear andConvincing Evidence:

[The plaintiff has theburden of proving byclear and convincingevidence all of the factsnecessary toestablish:__________.]

“Clear and convincing”evidence meansevidence of suchconvincing force that itdemonstrates, incontrast to the opposingevidence, a highprobability of the fact(s)for which it is offered asproof. Such evidencerequires a higherstandard of proof thanproof by aperponderance of theevidence.

You should consider allof the evidence bearingupon every issueregardless of whoproduced it.

CACI BAJI

CACI BAJI

CACI 202. Direct andIndirect Evidence:

Evidence can come inmany forms. It can betestimony about whatsomeone saw or heardor smelled. It can be anexhibit admitted intoevidence. It can besomeone’s opinion.Some evidence proves afact directly, such astestimony of a witnesswho saw a jet planeflying across the sky.Some evidence proves afact indirectly, such astestimony of a witnesswho saw only the whitetrail that jet planesoften leave. Thisindirect evidence issometimes referred toas “circumstantialevidence.” In eitherinstance, the witness’stestimony is evidencethat a jet plane flewacross the sky. As far asthe law is concerned, itmakes no differencewhether evidence isdirect or indirect. Youmay choose to believe ordisbelieve either kind.Whether it is direct orindirect, you shouldgive every piece ofevidence whateverweight you think itdeserves.

BAJI 2.00. Directand CircumstantialEvidence-Inferences:

Evidence consists oftestimony, writings,material objects orother things presentedto the senses andoffered to provewhether a fact exists ordoes not exist. Evidenceis either direct orcircumstantial. Directevidence is evidencethat directly proves afact. It is evidencewhich by itself, if foundto be true, establishesthat fact.Circumstantialevidence is evidencethat, if found to be true,proves a fact fromwhich an inference ofthe existence of anotherfact may be drawn. Afactual inference is adeduction that maylogically and reasonablybe drawn from one ormore facts establishedby the evidence. It isnot necessary that factsbe proved by directevidence. They may beproved also bycircumstantial evidenceor by a combination ofdirect andcircumstantialevidence. Both directand circumstantialevidence are acceptableas a means of proof.Neither is entitled toany greater weightthan the other.


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Another interesting change by the JudicialCounsel is the new jury instruction for a bifurcat-ed punitive damages jury trial. The BAJI punitivedamage instructions at 14.72.1 refer to two differ-ent phases. According to Judge Orfield theJudicial Council actually found cases in whichdefense attorney’s argued before juries that theyshould find no punitive damages so that theycould go home, as opposed to staying for an addi-tional round of deliberations to determine theamount of the damages. The judicial councilremoved these references in order to preventattorneys from making this argument.

The CACI instructions are available free ofcharge at the Judicial Counsel’s website,http://www.courtinfo.ca.gov/reference/docu-ments/civiljuryinst.pdf. LexisNexis has beenselected as the official publisher of the CACIinstructions. As official publisher, LexisNexis willproduce the jury instructions in print, on CD-ROM, and online. LexisNexis also offers the CACIinstructions in its new HotDocs document assem-bly software. This software allows attorneys andjudges to customize the CACI instructions to fitwithin the facts of a particular case.

The use of the CACI instructions in Californiacivil courts was made effective September 1, 2003.Like the BAJI instructions, use of the CACIinstructions is not mandatory. Plain languagecriminal jury instructions have also been draftedand are being examined for approval and usebeginning in 2005. s

The statements and opinions in theabtl-San Diego Report are those of the contributors

and not necessarily those of the editors or theAssociation of Business Trial Lawyers-San Diego.

© 2003, Association of Business Trial Lawyers-SanDiego. All rights reserved.

Editor:John T. Brooks (619) 699-2401

Editorial Board:Erik Bliss, Luke R. Corbett, S. Douglas Kerner, AlanM. Mansfield, Robert M. Shaughnessy, Bonnie M.

Simonek, and Robin Wofford.


Moreno’s opinion) subject to prior restraint analy-sis, the standard for such injunctions should be“more rigorous.” In the end, Justice Moreno wouldhave found that Bunner’s publication of DeCSSwas not a misappropriation of the plaintiff ’s tradesecrets, because wide-ranging publication on theInternet had already destroyed the technology’ssecrecy, and substantial secrecy is a necessarycondition to protection under the UTSA. JusticeMoreno relied heavily on cases noting that a partynot involved in the initial misappropriation of atrade secret cannot be prosecuted under tradesecret law for downloading and republishing pro-prietary information posted on the Internet, pri-marily because the information is in the publicdomain and is no longer secret.

Justice Moreno noted that DeCSS had beenmade available on “at least 118 Web sites,” and thatthe complaint was not filed until “approximatelytwo months after the initial posting.” Moreno, then,would have placed the heavy burden on plaintiff toshow that “the trade secret remains a secretdespite the Internet posting.” Justice Moreno foundthat the DVD CCA did not meet that burden, andhe would have affirmed the Court of Appeals deci-sion on these alternate grounds.

ConclusionThe Supreme Court’s majority opinion is strong

tonic for California business and individuals whouse trade secret law to protect their discoveriesand information. The Court’s emphasis on the pol-icy reasons underlying California’s trade secretlaw will be a useful guidepost to future courts andjuries.The majority’s decision to remand for deter-mination of the correctness of the preliminaryinjunction, coupled with Justice Moreno’s concur-rence that would find the preliminary injunctionwas not justified under trade secret law, doesleave open the substantial question about whatprotection will be afforded trade secret owners inCalifornia whose trade secrets are nefariouslypublished on the Internet. This case should beread as both a reaffirmation of California’s strongcommitment to protecting trade secrets and as awarning to trade secret owners to step up vigi-lance wherever electronic misappropriation anddistribution may occur. s

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OFFICERSHon. J. Richard Haden, PresidentFrederick W. Kosmo, Jr., 1st Vice PresidentCharles V. Berwanger, 2nd Vice PresidentMaureen H. Hallahan, TreasurerJan M. Adler, SecretaryRobin A. Wofford, Program ChairSusan W. Christison, Executive Director

BOARD OF GOVERNORSJan M. AdlerCharles V. BerwangerHon. Michael J. BollmanHon. Larry A. BurnsDennis M. ChildsMark W. DanisDana J. DunwoodyYvonne M. DuttonKenneth M. FitzgeraldGeorge H. FlemingRichard M. FreemanEdward M. GergosianHon. J. Richard HadenMaureen F. HallahanMark H. HamerHon. Herbert B. Hoffman (Ret.)

Charles T. HogePatricia P. HollenbeckDavid E. KleinfeldFrederick W. Kosmo, Jr.Michael A. LeoneChristopher H. McGrathHon. M. Margaret McKeownHon. William R. Nevitt, Jr.Michael H. RineyHon. Janis SammartinoHon. Richard E. L. StraussEdward P. Swan, Jr.Hon. Thomas J. WhelanJohn C. Wynne

PAST PRESIDENTSPeter H. Benzian 1997Michael Duckor 1994-1996Mark C. Mazzarella 1992-1994Alan Schulman 2001Hon. Ronald L. Styn 1998Claudette G. Wilson 1999Meryl L. Young 2000Alan Schulman 2001Howard E. Susman 2002

EMERITUS BOARD MEMBERSWilliam S. BoggsHon. Peter W. BowieLuke R. CorbettCharles H. DickHon. Irma E. GonzalezHon. Judith L. HallerHon. William J. Howatt, Jr.Hon. J. Lawrence Irving (Ret.)Hon. Ronald L. Johnson (Ret.)Hon. Arthur W. Jones (Ret.)Michael L. KirbyMichael L. LipmanHon. Jeffrey T. MillerDavid E. PerrineAbby B. SilvermanRobert G. SteinerWilliam F. SullivanReg A. VitekMichael J. WeaverShirli F. Weiss

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Documents

Volume X No. 2 October 2003 REPORT