[00:00:01] Speaker 02:
NRA ship line. M. Jonathan Hayes appearing for appellant.

[00:00:08] Speaker 01:
Good morning, Mr. Hayes.

[00:00:09] Speaker 02:
Good morning, Your Honor.

[00:00:10] Speaker 01:
I'm assuming you're not going to reserve any time since there's nobody on the other side. Right.

[00:00:17] Speaker 02:
I was going to make a joke about that, but I won't. All right. John Hayes, RHM law for the appellant copy solutions.

[00:00:28] Speaker 02:
And, Your Honor, I really don't...

[00:00:34] Speaker 02:
I think our brief pretty much laid it out. I have a few comments, though.

[00:00:41] Speaker 02:
And then, of course, I'm happy to answer questions.

[00:00:45] Speaker 02:
You know, this is an employer-employee dispute.

[00:00:51] Speaker 02:
The age-old problem the employee left and the allegation is he stole trade secrets.

[00:00:58] Speaker 02:
And...

[00:01:00] Speaker 02:
that caused harm to the employer. They had a trial judgment in her memorandum. I mean, she went through really a lot of effort on that memorandum.

[00:01:14] Speaker 02:
But she said that the idea of stealing secret information from your employer, former employer, that works for willful and malicious injury.

[00:01:28] Speaker 02:
But We didn't connect the dots. Formal counsel who handled the trial didn't connect the dots.

[00:01:39] Speaker 02:
She said that the Uniform Trade Secrets Act, California Civil Code 3436.1, that would have worked.

[00:01:50] Speaker 02:
She even said that Mr. Shuplaine probably did use the information, but we didn't connect the dots. It was a failure of evidence.

[00:02:02] Speaker 02:
And I'll tell you, I spent a lot of effort trying to argue that we did connect the dots. But, you know, it's a clear error. And my client is interviewing malpractice counsel about that issue. But the bottom line is the only issue was ASICs, willful and malicious injury.

[00:02:32] Speaker 02:
There was no fraud ever alleged.

[00:02:35] Speaker 02:
There was A4, which, I mean, there was no trust. There was never any chance, I don't think, of A4 working.

[00:02:44] Speaker 02:
So what we limited the appeal to was the fees, the $28,000 in fees that were awarded, which came from this 2018 agreement.

[00:02:58] Speaker 02:
I brought a copy of it.

[00:03:01] Speaker 02:
in four pages. There really isn't much to this. Nobody argued that this was unenforceable. This is where the attorney's fees award came from.

[00:03:14] Speaker 02:
Nobody argued that this was unenforceable, or even any part of it was unenforceable, except the non-compete clause, which Again, to my mind, is evidence of the malpractice. I mean, in California, everybody knows a non-compete clause is unenforceable. You can't tell your employee, look, you know, if you leave us, you got to go do something else because you can't compete with us. It's not enforceable.

[00:03:46] Speaker 02:
And it never was an issue. It was about trade secrets.

[00:03:53] Speaker 02:
There are two paragraphs in the agreement. One is called confidentiality and one is called proprietary information.

[00:04:04] Speaker 02:
Nobody ever questioned whether there's some question about what that means, what the paragraph means.

[00:04:13] Speaker 02:
In other words, there was no, the court was never challenged with interpreting this agreement.

[00:04:21] Speaker 02:
in order to reach the issue of was there a willful and malicious injury to person or property.

[00:04:30] Speaker 02:
What Judge Vaughn did say, she started out saying, you know, on its attorney's fees, we use a liberal construction. And she quoted that from the Penrod case.

[00:04:46] Speaker 02:
In 2016, 2015, I'll tell you when that case came out, I was telling everybody, you know, boy, this is great from now on. You know, motions for relief, that's on the contract. Motions to value. Everything we do almost is about a debt. A debt is if there's a document that talks about the debt and it has attorney's fees, the dispute is on the contract.

[00:05:11] Speaker 02:
If we win, we get attorney's fees.

[00:05:14] Speaker 02:
And You know, my joy didn't last all that long because the court, the Ninth Circuit came along with Boz and said, well, if the court, maybe there is a contract, but if the court didn't need to enforce the contract, then the issue is not on the contract, and therefore there's no right to attorney's fees. Okay.

[00:05:45] Speaker 02:
That was a pension fund.

[00:05:47] Speaker 02:
The agreement wasn't even with the debtor.

[00:05:52] Speaker 01:
So, Mr. Hayes, if I could interrupt you just for a moment. What concerns me here is not so much the decision.

[00:06:04] Speaker 01:
What concerns me is that that's not what you argued, not you personally, but your copy solutions argued below. It is. made the agreement the centerpiece of the litigation. It argued to the judge that it gave rise to the breach of fiduciary duty claim and gave rise to the malicious and willful injury claim under A6. It said that this agreement was critical. And that's the argument that was made. And that was why the court had to look at the contract and decide whether it was going to be the result or not going to be the result.

[00:06:40] Speaker 01:
And it determined that it wouldn't. But You're the one that, not you personally, but your side is the one that put that issue before the court.

[00:06:50] Speaker 01:
Had they not done that, maybe this argument would have more merit. But as far as I can see, the copy solutions pointed to the 18 agreement as the source of the debtor's fiduciary duty and the basis of its defalcations. Copy solutions alleged the debtor wrongfully and maliciously caused injury by violating the terms of the 2018 agreement. The bankruptcy court interpreted the 2018 agreement to ascertain the scope of the agency and to determine whether he owed fiduciary duties to copy solutions.

[00:07:24] Speaker 01:
That's what happened. Now, she didn't come out that way, but that's great in hindsight to be able to say, well, then it wasn't an issue on the contract, but you made it about the contract.

[00:07:37] Speaker 01:
This is the consequence of what the judge believed you were trying to accomplish. I don't see how it's unfair to hold Copy Solutions liable as the non-preventing party when that's what you were arguing. So help me through that.

[00:07:57] Speaker 02:
I've thought a lot about that. I mean, I've read the record.

[00:08:02] Speaker 02:
But I would just...

[00:08:06] Speaker 02:
on this way is towards the end of what you were saying, you used the word unfair. And I don't know that this is about unfair. This is an issue of law.

[00:08:21] Speaker 02:
Most of that actually was about the non-compete clause. They went on and on and on at trial. And then in the closing brief, about the non-compete clause. The court said that was never, and neither side, both sides agreed. In fact, Mr. Suplane told Mr. Zhao, you know, I'll sign it, but that's not enforceable.

[00:08:50] Speaker 02:
I mean, they kept bringing it up without a doubt by the attorneys.

[00:08:56] Speaker 02:
But is that, did that make the... Litigation on the contract?

[00:09:04] Speaker 02:
I was capturing myself there. I almost said that.

[00:09:06] Speaker 01:
Because the other two elements are the contract provides for the recovery of attorney's fees to award it to one of the parties prevailing, and that the party seeking fees was the prevailing party. So the last two elements are clear. The only argument is it wasn't on the contract, and that's because the court didn't rely on the contract in ruling, but that's not the position that your clients took in the litigations. They made the contract the centerpiece of their position, both for the malicious willful injury claim and for the breach of fiduciary duty claim.

[00:09:44] Speaker 02:
Well, the court didn't rely on the contract.

[00:09:46] Speaker 00:
But the court, it was brought up by your client and your predecessor attorneys.

[00:09:55] Speaker 00:
As Judge Gant said, they made it part of the contract. And since, but The court rejected that, and it was the rejection of it, so your client was not the prevailing party.

[00:10:10] Speaker 00:
They said this contract should give us a basis for our claim, and the court said, no, it doesn't. So that part of it was on the contract.

[00:10:21] Speaker 02:
Well, I don't agree that the court said that the contract – the court didn't rule that you lose because of this, the way I interpret this contract.

[00:10:32] Speaker 02:
The rule, the court rule, you didn't have enough evidence to prove anything, really.

[00:10:38] Speaker 02:
And therefore, you lose. We're definitely not the prevailing party. And it seems to me, at least, it's so obvious that California law says you can't steal your former employer's trade secrets.

[00:11:00] Speaker 02:
that this was pretty much irrelevant.

[00:11:04] Speaker 02:
And I have no doubt it was irrelevant, but I understand that.

[00:11:09] Speaker 00:
I don't want to sound confused here, but if somebody comes in and brings an action related to, okay, I'm not using odd, related to a contract and say, this is important for the court to conclude.

[00:11:23] Speaker 00:
And the court says, no, you're wrong.

[00:11:26] Speaker 00:
Well, you were wrong. wrong on an issue that was on the contract.

[00:11:33] Speaker 00:
No, the contract doesn't apply here. So if a party wins in convincing the court that that contract doesn't apply, don't they get to say it shouldn't have been raised? And as a result, because it shouldn't have been raised, what you raised does have a contract clause in were entitled as prevailing party. I'm confused why that doesn't follow.

[00:12:03] Speaker 02:
You know, I'm not sure how to answer that.

[00:12:08] Speaker 02:
But I would say, again, you know, walking around the block thinking about this a lot, I think that the trial would have went exactly the same way it did had there not been the contract.

[00:12:21] Speaker 00:
And maybe your client would not have gotten an attorney's fees award if they didn't raise the contract issue.

[00:12:28] Speaker 02:
I was going to correct myself there that it wouldn't have gone exactly the same way because the attorneys wouldn't have kept saying, well, what about the contract? I mean, the contract says this or that.

[00:12:40] Speaker 02:
That would have been left out had there been a trial without this contract. My view anyway is It's on the contract if this is actually the issue. If the attorneys are saying this is the issue, but it clearly isn't, then it's not on the contract.

[00:13:08] Speaker 00:
But isn't it on the contract that you determine that the contract is not an operative document?

[00:13:17] Speaker 00:
If one side says, hey, you should look at this, we're suing and saying, that this contract is an important part of our claim, and that's rejected.

[00:13:31] Speaker 01:
Can't the party... I mean, that's a problem, right? In retrospect, you could have argued state law and never even raised the agreement, and then this would not have been an issue. But because you brought it before the court, your side, I don't mean you individually, then you're stuck with what the record is. And the record was you made a series of arguments over and over again before this court, before the trial court, that the court should interpret the agreement in the way that you believed it should be interpreted, and as a result, it should fine for you.

[00:14:09] Speaker 01:
And that's why the litigation was on the contract.

[00:14:16] Speaker 02:
I can't believe I actually talked for 14 minutes.

[00:14:21] Speaker 02:
A thought just popped into my head, an example, is what if the contract said we agree we won't murder each other? You know, murder is murder. You know, what the contract says is irrelevant. If it's murder, it's murder.

[00:14:37] Speaker 02:
If one side is saying, well, the contract says, you know, we won't murder each other.

[00:14:43] Speaker 00:
Well, but if one party was making that argument, they weren't murdered. So.

[00:14:51] Speaker 00:
They couldn't have made the argument.

[00:14:53] Speaker 02:
I'll leave it at that.

[00:14:55] Speaker 01:
Thank you for your arguments. Thank you. Thank you.

[00:15:00] Speaker 01:
We'll take the matter under advisement and we'll try to issue a decision promptly. Thank you.

[00:15:05] Speaker 02:
Thank you.