Smartcomm v. Palmieri ( 2018 )

NOTICE: NOT FOR OFFICIAL PUBLICATION.
UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.
IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE
SMARTCOMM LICENSE SERVICES LLC, Plaintiff/Appellant,
v.
JON PALMIERI, et al., Defendants/Appellees.
No. 1 CA-CV 16-0265, 1 CA-CV 16-0281 (Consolidated)
FILED 1-9-2018
Appeal from the Superior Court in Maricopa County
No. CV2010-032209
The Honorable Arthur T. Anderson, Judge
AFFIRMED
COUNSEL
Wilenchik & Bartness, PC, Phoenix
By Dennis I. Wilenchik, Tyler Q. Swensen, David Timchak,
Thomas E. Lordan
Co-Counsel for Plaintiff/Appellant Smartcomm
Smartcomm, LLC, Phoenix
By Michael R. Somers
Co-Counsel for Plaintiff/Appellant
Osborn Maledon, PA, Phoenix
By Scott W. Rodgers
Counsel for Defendant/Appellee Palmieri
Tiffany & Bosco, PA, Phoenix
By Lance R. Broberg, Timothy C. Bode
Counsel for Defendants/Appellees Alcorn et al.
Thomas E. Littler, Esq., Phoenix
By Thomas E. Littler
Counsel for Defendant/Appellee Spectrum
MEMORANDUM DECISION
Presiding Judge Kenton D. Jones delivered the decision of the Court, in
which Judge Jon W. Thompson and Judge John C. Gemmill1 joined.
J O N E S, Judge:
¶1 Smartcomm License Services, L.L.C. (Smartcomm) appeals
the trial court’s grant of summary judgment in favor of Appellees David
Alcorn Professional Corporation; David and Elizabeth Alcorn, Janus
Spectrum, L.L.C. (collectively, the Alcorn Defendants); and Jon Palmieri.
Smartcomm also appeals the trial court’s denial of an application for an
order to show cause. For the following reasons, we affirm.
FACTS AND PROCEDURAL HISTORY
¶2 Smartcomm was organized to help consumers prepare and
file applications to purchase cellular spectrum licenses2 from the Federal
Communications Commission (FCC). Smartcomm hired Kent Maerki,
1 The Honorable John C. Gemmill, Retired Judge of the Court of
Appeals, Division One, has been authorized to sit in this matter pursuant
to Article 6, Section 3, of the Arizona Constitution.
2 In 2004 and 2005, the FCC announced that a large number of 800
MHz licenses vacated by Sprint, usable for cellular and broadband
multimedia services, would become available for purchase at some later
date. Smartcomm’s business model was to prepare the applications ahead
of the release date, so that its clients would be the first in line to purchase
the licenses.
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David Alcorn Professional Corporation (DAPC), and Jon Palmieri as
independent contractors to solicit customers for Smartcomm. Smartcomm
entered into separate agreements with all three independent contractors
and furnished each with company materials Smartcomm alleged were
confidential and contained trade secrets. The contracts contained
confidentiality provisions that required the return of the confidential
company materials upon termination of the agreement. However, the
contracts did not contain non-compete provisions. Smartcomm eventually
terminated its arrangement with Maerki, DAPC, and Palmieri for breach of
contract. Smartcomm claims that, in the course of their business
relationship, Maerki, David Alcorn, and Palmieri obtained Smartcomm’s
client list and retained copies of documents containing trade secrets
following their terminations, which they then used to form a competing
company, Janus Spectrum, L.L.C. (Janus).
¶3 Smartcomm initially filed suit only against Maerki, but later
amended its complaint to include the Alcorn Defendants and Palmieri. The
first amended complaint included claims of breach of contract (Claim
Three), breach of the covenant of good faith and fair dealing (Claim Four),
misappropriation of trade secrets (Claim Seven), unfair competition (Claim
Eight), tortious interference with business relations (Claim Nine), breach of
the duty of loyalty (Claim Eleven), aiding and abetting (Claim Thirteen),
and conspiracy (Claim Fourteen).
¶4 This case languished in the discovery process, with all parties
alleging discovery abuses. Indeed, the trial court ultimately struck the
answer filed by Maerki and associated defendants (collectively, the Maerki
Defendants) as a discovery sanction and entered default judgment against
the Maerki Defendants for approximately $28 million. Although the
Maerki Defendants are not parties to this appeal, Smartcomm relied upon
the default judgment against the Maerki Defendants in its attempt to
overcome a motion for partial summary judgment.
¶5 Over the course of addressing four motions for partial
summary judgment, the trial court resolved all claims against Smartcomm.
After the court entered final judgment and awarded Appellees their
attorneys’ fees, Smartcomm appealed, arguing the court erred in resolving
each partial summary judgment. Additionally, Smartcomm argues the trial
court erred when it denied an application for an order to show cause
regarding allegations the Alcorn Defendants and Palmieri violated a
permanent injunction against contacting Smartcomm’s clients. We have
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jurisdiction over Smartcomm’s timely appeal pursuant to Arizona Revised
Statutes (A.R.S.) §§ 12-120.21(A)(1)3 and -2101(A)(1).
DISCUSSION
¶6 We review a trial court’s grant of summary judgment de novo,
viewing the evidence in the light most favorable to the non-prevailing
party. Salib v. City of Mesa, 212 Ariz. 446, 450, ¶ 4 (App. 2006) (citing Romley
v. Arpaio, 202 Ariz. 47, 51, ¶ 12 (App. 2002)). Summary judgment is proper
if no genuine issues of material fact exist and the moving party is entitled
to judgment as a matter of law. Ariz. R. Civ. P. 56(a); Orme Sch. v. Reeves,
166 Ariz. 301, 305 (1990). Summary judgment is also proper when the facts
supporting a claim “have so little probative value, given the quantum of
evidence required,” that no reasonable person could find for its proponent.
Orme Sch., 166 Ariz. at 309.
I. Motion for Partial Summary Judgment on Damages (Damages
MPSJ)
¶7 The Alcorn Defendants filed the Damages MPSJ in November
of 2013, arguing Smartcomm had failed to establish any material fact of
damages. Both parties filed numerous supplemental pleadings on this
motion and had ample time and opportunity to produce the necessary
documents. The trial court ultimately granted summary judgment on all
but one claim in favor of the Alcorn Defendants, finding Smartcomm did
not “establish either the fact of damages or an amount of damages
attributable to Defendants’ conduct.” The court denied the Alcorn
Defendants’ summary judgment on Smartcomm’s misappropriation of
trade secrets claim (Claim Seven). Smartcomm appeals the ruling, arguing:
(1) the court erred by entering judgment before the close of discovery, and
(2) Smartcomm presented sufficient evidence of damages.
¶8 We reject Smartcomm’s argument that the trial court erred by
ruling upon the Damages MPSJ before the close of discovery. Although
Smartcomm raised the issue within its response to the Damages MPSJ,4
Smartcomm later waived the claim when it moved to vacate the summary
3 Absent material changes from the relevant date, we cite the current
version of rules and statutes.
4 Indeed, Smartcomm successfully obtained additional time to obtain
“crucial discovery” prior to filing its response. See Ariz. R. Civ. P. 56(d)
(previously Rule 56(f)).
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judgment, admitting: “Smartcomm is not arguing that it did not have an
opportunity to present evidence. Rather, it is arguing that the Court
ignored evidence Smartcomm presented and made fundamental errors in
applying the law to the evidence before it.” Having taken this position,
Smartcomm is estopped from now claiming it “was denied the opportunity
to address [discovery deficiencies] because of the trial court’s ruling
prematurely granting summary judgment.” Cf. Adams v. Bear, 87 Ariz. 288,
294 (1960) (“[A] party is bound by his judicial declarations and may not
contradict them in . . . subsequent proceedings involving the same parties
and questions.”) (citations omitted); Martin v. Wood, 71 Ariz. 457, 459 (1951)
(proscribing “the mischiefs” that would occur “from the destruction of all
confidence in the intercourse and dealings of men, if they were allowed to
deny that which by their solemn and deliberate acts they have declared to
be true”) (quoting Hatten Realty Co. v. Baylies, 290 P. 561, 566 (Wyo. 1930));
Miles v. Franz Lumber Co., 14 Ariz. 455, 457 (1913) (“[A party] should not be
permitted to ‘blow hot and cold’ with reference to the same transaction or
insist at different times on the truth of each of two conflicting allegations
according to the promptings of his private interest.”).
¶9 Smartcomm next argues it presented sufficient evidence of
damages at summary judgment. Smartcomm presented three theories of
recovery for damages: (1) refund obligations incurred when Smartcomm’s
clients lost licenses to competing Janus clients, (2) all of Janus’s profits, and
(3) attorneys’ fees incurred filing a series of applications with the FCC
urging them to reject Janus clients’ license applications.
A. Refund Obligations
¶10 A party claiming damages must disclose “a computation and
measure of each category of damages alleged by the disclosing party, the
documents and testimony on which such computation and measure are
based, and the name, address, and telephone number of each witness whom
the disclosing party expects to call at trial to testify on damages.” Ariz. R.
Civ. P. 26.1(a)(7). If a party fails to produce evidence to support its claims
for damages, summary judgment is appropriate. See United Dairymen of
Ariz. v. Schugg, 212 Ariz. 133, 139, ¶ 21 (App. 2006). Likewise, when “vital
information is readily available to a party, it can only be presumed from the
failure to produce it that the inference is adverse.” State Tax Comm’n v.
Graybar Elec. Co., 86 Ariz. 253, 257 (1959) (citing Alger v. Brighter Days Mining
Corp., 63 Ariz. 135, 141 (1945)).
¶11 Despite specific requests from the Alcorn Defendants on at
least four occasions, Smartcomm did not produce sufficient evidence of the
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existence of any refund damages. “Refund damages,” for purposes of this
litigation, were defined as the partial refunds Smartcomm owed its clients
when its clients’ applications for a license were unsuccessful. Initially,
Smartcomm failed to even allege refund damages, instead arguing only it
could recover all of Janus’s allegedly ill-gotten profits as damages. Resting
entirely on the ill-gotten profits theory, Smartcomm argued the Alcorn
Defendants had exclusive control of the evidence needed to prove damages.
¶12 After repeated requests from the Alcorn Defendants to
disclose supporting documents such as contracts, refund checks, names of
clients who received refunds, and affidavits from witnesses, Smartcomm
finally filed supplemental disclosure statements purporting to address the
refund damages. Those disclosure statements, which Smartcomm attached
to its first supplemental response to the Damages MPSJ, contained a
spreadsheet that grouped Smartcomm’s refund obligations into four
categories. Only the first category identified refunds Smartcomm had
already paid. The other three categories contained, at best, speculative
calculations of future losses.
¶13 Although Smartcomm’s chief executive officer verified the
ninth and tenth supplemental disclosures, the speculative nature of the
claims contained within those disclosures failed to establish a genuine issue
of material fact. See Coury Bros. Ranches v. Ellsworth, 103 Ariz. 515, 521 (1968)
(“Damages that are speculative, remote or uncertain may not form the basis
of a judgment.”). Affidavits and testimony by plaintiffs, without
supporting documentation, may be found insufficient to overcome
summary judgment. See Gilmore v. Cohen, 95 Ariz. 34, 36 (1963) (holding the
plaintiffs’ testimony, without supporting business and tax records, was
insufficient to overcome summary judgment); Desert Palm Surgical Grp.,
P.L.C. v. Petta, 236 Ariz. 568, 583, ¶ 42 (App. 2015) (concluding the plaintiff’s
testimony and conclusory statements regarding damages, “unsupported by
any documentary evidence,” were speculative).
¶14 In this case, we find that neither the ninth nor tenth
supplemental disclosures created a genuine issue of material fact sufficient
to avoid summary judgment. Despite multiple discovery requests by the
Alcorn Defendants, Smartcomm only produced the names of seven clients
whom Smartcomm claimed had received refunds of around $127,000 to
support its claimed damages in excess of $17 million. Of these seven clients,
Smartcomm only disclosed two refund check stubs, and one of those does
not match the descriptions listed within Smartcomm’s spreadsheet.
Further, Smartcomm failed to attach any contracts or affidavits from clients
who assertedly received those refunds. This was the only disclosure of
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alleged refunds Smartcomm ever produced before the trial court ruled on
the Damages MPSJ. Such paltry evidence in support of the substantial
damage assertion, particularly when Smartcomm was in exclusive
possession of the documents necessary to support its refund obligations
claim, has “so little probative value, given the quantum of evidence
required,” that no reasonable person could find for its proponent. Orme
Sch., 166 Ariz. at 309; see also Graybar Elec., 86 Ariz. at 257 (citing Alger, 63
Ariz. at 141).
¶15 The only other evidence Smartcomm presented was the $28
million default judgment entered against the Maerki Defendants by a
commissioner of the superior court. In its second supplemental response
to the Damages MPSJ, Smartcomm advised the trial court it had presented
evidence of its damages at the default judgment hearing through exhibits
and testimony, but it did not attach the exhibits or testimony to its
supplemental response.5 Smartcomm instead argued that the default
judgment was conclusive proof that Smartcomm had both disclosed and
proved its damages because the damages were “essentially the same
against not just the Maerki Defendants, but all of the Defendants.”
¶16 Smartcomm’s reliance upon the default judgment is
misplaced. The Alcorn Defendants were not parties to that proceeding and
did not have an opportunity to defend their interests. Moreover, because
the trial court did not oversee the default judgment against the Maerki
Defendants, it had no way to review the evidence produced at that hearing,
whether testimonial or documentary, that ultimately prompted the
commissioner’s determination of damages. Additionally, the minute entry
from the default hearing states, “[t]he court must take all of the allegations
as established for purposes of determining damages against the defaulted
Maerki Defendants,” indicating Smartcomm proceeded with a much lower
burden of proof than that required to withstand summary judgment.
5 Smartcomm references the exhibits in its opening brief, but does not
indicate where those exhibits might be found within the record. Moreover,
the record does not indicate the exhibits were ever submitted to the trial
court or entered into evidence. Thus, although Smartcomm argues
“Appellees cannot plausibly claim that the evidence presented at the
Default Judgment Hearing should not be considered against them here,”
we are unable to determine whether that is the case, or otherwise consider
the evidence. See GM Dev. Corp. v. Cmty. Am. Mortg. Corp., 165 Ariz. 1, 4
(App. 1990) (“An appellate court’s review is limited to the record before the
trial court.”) (citing Schaefer v. Murphey, 131 Ariz. 338, 343 (App. 1981), and
Cimino v. Always, 18 Ariz. App. 271, 272 (1972)).
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Although we express no opinion as to whether the commissioner applied
the correct burden of proof to the damages hearing, we hold that, in
evaluating whether summary judgment was appropriate, Smartcomm’s
allegations presented in another court before another judicial officer could
not be taken as established fact. See Ariz. R. Civ. P. 56(e) (stating a party
opposing summary judgment “may not rely merely on allegations or
denials of its own pleading,” but rather “must . . . set forth specific facts
showing a genuine issue for trial”). Stated simply, Smartcomm was
required to produce evidence of its asserted refund obligations but failed to
do so.
B. Attorneys’ Fees from FCC Litigation
¶17 As part of its claim for damages, Smartcomm sought recovery
of more than $400,000 in attorneys’ fees accrued when it petitioned the FCC
to reject competing applications from Janus clients. Much like the refund
damages, Smartcomm first raised this issue late in the pleadings and
provided no documented evidence to support its claim. Smartcomm’s only
reference to these attorneys’ fees appeared in its ninth supplemental
disclosure, in which Smartcomm alleged: “Janus’s unfair competition also
caused Smartcomm to file its Petition to Deny with the FCC, in which it
incurred substantial attorneys’ fees and costs.” At summary judgment,
Smartcomm did not provide a calculation of its fees or any documents to
support the allegation.6 In no fashion was Smartcomm’s evidence in
support of this claim sufficient. See, e.g., Schweiger v. China Doll Rest., Inc.,
138 Ariz. 183, 188 (App. 1983) (detailing the information required to
substantiate a claim for attorneys’ fees). Accordingly, Smartcomm failed to
produce sufficient evidence at summary judgment to support its claims for
damages related to attorneys’ fees, and we affirm the trial court’s summary
judgment as it pertains to attorneys’ fees.
C. Janus’s Profits
¶18 A party opposing summary judgment must contest the
accuracy of the moving party’s evidence with specific, admissible facts. See
Ariz. R. Civ. P. 56(e); Florez v. Sargeant, 185 Ariz. 521, 526-27 (1996).
“Affidavits that contain inadmissible evidence . . . may provide a ‘scintilla’
or create the ‘slightest doubt’ and still be insufficient to withstand a motion
for summary judgment.” Orme Sch., 166 Ariz. at 309 (citations omitted).
6 Indeed, the first time Smartcomm provided the trial court with a
dollar amount for its alleged attorneys’ fees was in its motion for new trial.
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¶19 After the Alcorn Defendants filed the Damages MPSJ,
Smartcomm sought Rule 56(d) relief for additional discovery, arguing the
Alcorn Defendants had not disclosed Janus’s financial documents, which
Smartcomm needed to calculate its damages. Smartcomm argued the trial
court could require the defendants to disgorge their profits because they
had misappropriated Smartcomm’s trade secrets. The trial court granted
the request, and, a few months later, Janus filed for bankruptcy. As part of
its bankruptcy proceedings, Janus filed several financial documents
detailing its operating expenses and profits. Janus and the Alcorn
Defendants also had their electronic devices imaged and produced by a
third party, which was then disclosed to Smartcomm.
¶20 Smartcomm again relied upon its ninth and tenth
supplemental disclosure statements. The ninth disclosure statement
references the bankruptcy documents and provides specific calculations
from them. However, the documents themselves were not disclosed. While
the documents themselves may have been admissible, Smartcomm’s
allegations, even when verified, that it saw the financial documents and
accurately calculated the damages, are not. Accordingly, we conclude
Smartcomm failed to present sufficient evidence at summary judgment of
Janus’s profits.
¶21 Under each of the three theories of recovery Smartcomm
asserted, it failed to provide the trial court with sufficient evidence to
survive summary judgment, and we affirm the court’s grant of partial
summary judgment in favor of the Alcorn Defendants on Claims Three,
Four, Eight, Nine, Eleven, Thirteen, and Fourteen.7
D. Palmieri Motion for Partial Summary Judgment
¶22 Following the trial court’s grant of summary judgment in
favor of the Alcorn Defendants, Palmieri filed his own MPSJ on all claims
except Claim Seven (misappropriation of trade secrets) on the same basis.
Smartcomm responded only by referencing what had been its unsuccessful
pleadings from the Alcorn Damages MPSJ and provided no new arguments
or evidence. Consistent with its earlier decision, the trial court ruled in
favor of Palmieri, citing Smartcomm’s failure to make any new argument.
We affirm the court’s grant of summary judgment for the reasons stated in
Part I(A)-(C), supra.
7 The remaining claim, alleging misappropriation of trade secrets, was
dismissed in a later summary judgment. See infra Part II.
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II. Partial Summary Judgment on Trade Secret Claims
¶23 Smartcomm argues the trial court erred in finding there was
no genuine dispute as to any material fact regarding Count Seven, alleging
misappropriation of trade secrets. In a supplemental disclosure,
Smartcomm alleged the defendants misappropriated nine trade secrets.
Smartcomm described the first two alleged trade secrets as “Smartcomm’s
list of customers,” and “Smartcomm’s list of Independent Marketing
Representatives.” The other seven alleged secrets were part of an
“advertisement” or marketing package Smartcomm distributed broadly to
over three thousand potential customers.
¶24 “To establish a claim for misappropriation of a trade secret,
the claimant must first prove a legally protectable trade secret exists.” Calisi
v. Unified Fin. Servs., L.L.C., 232 Ariz. 103, 106, ¶ 14 (App. 2013). Arizona
has adopted the Uniform Trade Secrets Act (UTSA), A.R.S. §§ 44-401 to
-407, which defines “trade secret” as:
information, including a formula, pattern, compilation,
program, device, method, technique or process, that both:
(a) Derives independent economic value, actual or potential,
from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can
obtain economic value from its disclosure or use.
(b) Is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy.
A.R.S. § 44–401(4). Thus, “the two-part inquiry under the UTSA focuses on:
first, whether the subject matter of the information is secret; and second,
whether reasonable efforts have been taken to keep the information secret.”
Calisi, 232 Ariz. at 106, ¶ 15 (citing A.R.S. § 44-401(4), and Enter. Leasing Co.
of Phx. v. Ehmke, 197 Ariz. 144, 149-50, ¶¶ 15, 22 (App. 1999)).
A. Marketing Materials
¶25 We need not decide whether the subject matter of the
marketing materials that Smartcomm alleges were misappropriated was
secret because it failed to produce evidence that it made reasonable efforts
to protect the information. The material facts in this regard are not in
dispute. Smartcomm admitted it sent its marketing package, complete with
what it asserts to have been highly profitable “trade secrets,” to over three
thousand potential clients. The recipients were not employees or even
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existing clients of Smartcomm, but potential clients and can aptly be
described as “the public at large.” Moreover, the marketing materials were
sent to these potential clients without first obtaining a non-disclosure
agreement or otherwise preventing subsequent distribution or use by the
recipients.
¶26 Smartcomm, relying upon Ehmke, argues that the mass
mailing was a “limited publication for a restricted purpose,” and therefore
it did not relinquish its secrecy. See Ehmke, 197 Ariz. at 150, ¶ 23 (noting
“the owner of a trade secret does not relinquish its secret by disclosure to
employees on a necessary basis or by limited publication for a restricted
purpose”) (citing Metallurgical Indus., Inc. v. Fourtek, Inc., 790 F.2d 1195, 1200
(5th Cir. 1986)). However, as noted in Ehmke, “public revelation would
dispel all secrecy.” Id.; see also Ruckelshaus v. Monsanto Co., 467 U.S. 986,
1002 (1984) (“If an individual discloses his trade secret to others who are
under no obligation to protect the confidentiality of the information, or
otherwise publicly discloses the secret, his property right is extinguished.”)
(citing Harrington v. Nat’l Outdoor Advert. Co., 196 S.W.2d 786, 791 (1946),
and 1 R. Milgrim, Trade Secrets § 1.01[2] (1983)). By mailing the marketing
materials to over three thousand potential clients — persons with no
obligation to maintain the “secret” or limit its use — without first obtaining
a non-disclosure agreement, Smartcomm let the proverbial cat out of the
bag and cannot now, through this litigation or otherwise, get it back in.
B. Customer and Independent Marketing Representative
(IMR) Lists
¶27 “If the party with the burden of proof on the claim or defense
cannot respond to the motion [for summary judgment] by showing that
there is evidence creating a genuine issue of fact on the element in question,
then the motion for summary judgment should be granted.” Orme Sch., 166
Ariz. at 310. “[A]n opposing party may not rely merely on allegations or
denials of its own pleading.” Ariz. R. Civ. P. 56(e).
¶28 We need not decide whether the “list of customers” or IMR
list are trade secrets because Smartcomm failed to sufficiently disclose the
lists at summary judgment such that the trial court could even evaluate the
issue. Smartcomm alleged within its complaint that Maerki and Palmieri
misappropriated the customer and IMR lists and used them to contact
Smartcomm’s customers on behalf of Janus. When asked to clarify which
list Smartcomm referred to, Smartcomm, in circular fashion, in essence
replied, “the one you stole.” The following exchange at an October 2015
oral argument highlights the deficiency of Smartcomm’s evidence:
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THE COURT: . . . I understand the work, as you had described
it, to compile this list. But where is that list? They don’t seem
to know where that list is. . . . So where is this list that you
contend constitutes a trade secret?
[SMARTCOMM]: Well, they have it, of course, through Mr.
Maerki.
THE COURT: I understand — no, that’s not good enough. . . .
You can’t say, you got it from Maerki. They’re entitled to
know what this list is so they can challenge the compilation
on this list of whether it’s a trade secret.
¶29 Smartcomm alleged the defendants stole its list of customers.
It was not Appellees’ burden to establish Smartcomm’s claims at summary
judgment. Smartcomm could not rest merely upon allegations, but instead
was required to sufficiently disclose the subject matter of the alleged trade
secrets so Appellees could challenge whether the lists constituted and
remained trade secrets.
¶30 When pressed for a more specific disclosure, Smartcomm
advised the list was in the repository of documents that “everyone” had
access to, which the trial court also found inadequate:
THE COURT: You understand why that response is
problematic, don’t you? If you were faced with a response
that says, among the documents I gave you is a list, I’m sure
you’d be the first one to say, how am I supposed to figure it
out? How about if I guess wrong? Their response is, if there’s
a list, give me the stinking list. And that’s their argument.
And they’ve been trying to get it. The fact that it might be
within a number of documents somewhere, frankly I don’t
think is good enough.
Even on appeal, Smartcomm does not identify any client list or IMR list in
the record. Instead, Smartcomm directs the Court to its seventh
supplemental disclosure, which contains only the same basic descriptions
— “Smartcomm’s list of customers,” and “Smartcomm’s list of Independent
Marketing Representatives.”8
8 Smartcomm’s sixth supplemental disclosure contains a lengthy
description of how Smartcomm developed its “proprietary leads database”
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¶31 Smartcomm argues it was only required to describe the
subject matter of the lists, not actually disclose them. To support its
argument, Smartcomm cites a federal case out of California, Brocade
Communications Systems, Inc. v. A10 Networks, Inc., 873 F. Supp. 2d 1192, 1214
(N.D. Cal. 2012), which is neither binding upon this Court, nor does it stand
for the proposition that a party may effectively respond to a motion for
summary judgment by providing a generic description of its evidence, as
Smartcomm would have us believe:
[A]lthough Brocade does not list individual customer names,
Brocade has sufficiently “described the subject matter of the
trade secret with sufficient particularity to separate it from
matters of general knowledge in the trade or of special
knowledge of those persons who are skilled in the trade, and
to permit defendant to ascertain at least the boundaries within
which the secret lies.”
Id. at 1215 (quoting Whyte v. Schlage Lock Co., 101 Cal. App. 4th 1443, 1453
(2002)) (emphasis in original). Unlike Smartcomm, the Brocade plaintiff
described the subject matter of the trade secret with particularity, such that
the defendant could easily identify the list at issue, and in a manner
justifying its treatment as a trade secret. Smartcomm refused to identify
with sufficient particularity which documents, among the thousands in the
repository, it considered trade secrets.
¶32 After years of discovery, and days before the scheduled trial,
Smartcomm stood before the trial court with only bare assertions and
inferences. On this record, we can reach no other determination than that
Smartcomm failed to respond to the motion for summary judgment with
“evidence creating a genuine issue of fact.” Orme Sch., 166 Ariz. at 310. On
appeal, Smartcomm likewise fails to reference any evidence in the record
sufficient to permit its claim to be heard by a jury. Accordingly, we affirm
the trial court’s partial summary judgment on the trade secret claim.
from FCC microfiche records. However, Smartcomm does not contend this
“leads database” is actually the customer list it claims was
misappropriated.
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III. Partial Summary Judgment on Alcorn’s Personal Liability
¶33 Because we affirm summary judgment in favor of the Alcorn
Defendants on all claims, we need not consider the separate grant of partial
summary judgment on Claims Three, Four, and Eleven.
IV. Dismissal of Request for Order to Show Cause
¶34 Smartcomm also appeals the trial court’s denial of its
application for an order to show cause as “moot.”9 Smartcomm filed two
applications for orders to show cause, one in 2013, the other in 2015, both
alleging Palmieri and the Alcorn Defendants had violated a permanent
injunction against contacting Smartcomm’s clients. The 2013 application
argued Palmieri and the Alcorn Defendants had sent two emails to people
on the no-contact list, in violation of subsection (3) of the injunction. Then,
before the 2013 matter was resolved, Smartcomm filed the 2015 application,
which it argued was “independent” of the 2013 application. The 2015
application, however, argued that both the Palmieri and the Alcorn
Defendants violated subsections (1), (3), and (5) of the injunction and
admitted the two applications had “some obvious overlap” for
subsection (3). The trial court denied the 2013 application as moot, and,
after considering the 2015 application, found sanctions were not warranted.
¶35 Because the two applications overlapped on subsection (3),
and the 2015 application added nothing new to the 2013 application’s
subsection (3) arguments, it was not an abuse of discretion to deny the 2013
application as moot. All the 2013 application arguments were subsumed
within the 2015 application, which the trial court denied, finding sanctions
were not warranted. Accordingly, we affirm the denial of the 2013
application.
9 The Alcorn Defendants argue Smartcomm failed to provide any case
authority or record citations to support this argument. See ARCAP 13(a)
(specifying what information should be contained in appellate briefs). In
its reply brief, Smartcomm likewise alleges similar deficiencies in the
answering briefs. In our discretion, we deny the relief requested by the
parties under ARCAP 13 and decide the issues on the merits. See Clemens
v. Clark, 101 Ariz. 413, 414 (1966) (“[T]his Court is reluctant to perform the
duties of counsel for either party to an appeal; however, . . . we remain
inclined to decide cases on their merits.”).
14
SMARTCOMM v. PALMIERI, et al.
Decision of the Court
V. Motion to Take Judicial Notice
¶36 The night before this Court’s scheduled oral argument,
Smartcomm filed a motion requesting we take judicial notice of a recent
order issued against Janus and the Alcorn Defendants in the United States
District Court for the District of Arizona. There, the Securities and
Exchange Commission filed suit against Janus and the Alcorn Defendants
for violating registration requirements of the Securities Act and
participated in a fraudulent investment scheme. Smartcomm asserts the
District Court’s approximation of Janus’s ill-gotten gains at $6,172,260 is
“virtually identical to the claims and damages disclosed by [Smartcomm]
in this action.” In our discretion, we decline to take judicial notice of this
order.10
CONCLUSION
¶37 The trial court’s orders are affirmed.
¶38 We award Appellees reasonable attorneys’ fees and costs to
be determined upon compliance with ARCAP 21(b), pursuant to A.R.S.
§ 12-341.01 and the contracts between the parties.
10 Were we to take notice of the District Court’s findings on the
ill-gotten gains, we would necessarily also take notice of its finding that the
broadband frequency licenses “had little or no value.” Such a finding
would altogether undermine Smartcomm’s trade secret claims because for
something to be a trade secret, it must “derive[] independent economic
value.” A.R.S. § 44-401(4).
15