Los Defensores, Inc. v. Gomez , 223 Cal. App. 4th 377 ( 2014 )


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  • Filed 1/24/14
    CERTIFIED FOR PUBLICATION
    IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
    SECOND APPELLATE DISTRICT
    DIVISION FOUR
    LOS DEFENSORES, INC.,                         B240725
    (Los Angeles County
    Plaintiff and Respondent,    Super. Ct. No. BC411527)
    v.
    ROSA GOMEZ et al.,
    Defendants and Appellants.
    APPEAL from a judgment of the Superior Court of Los Angeles, Mary Ann
    Murphy, Judge. Affirmed.
    Lewis Brisbois Bisgaard & Smith, Roy G. Weatherup and Caroline E. Chan;
    Law Offices of Robert C. Moest and Robert C. Moest for Defendants and
    Appellants.
    Towle Denison Smith & Maniscalco, James P. Maniscalco and Amanda R.
    Washton for Plaintiff and Respondent.
    In the underlying action, the trial court ordered the entry of a default against
    appellants as a sanction for discovery abuse, and issued a default judgment
    awarding respondent damages and injunctive relief. Appellants contend that the
    discovery sanctions were improper, that the complaint stated no cause of action,
    that they received inadequate notice of the damages respondent sought, and that
    the damages awarded were excessive. We reject these contentions, and affirm.
    RELEVANT FACTUAL AND PROCEDURAL BACKGROUND
    A. Underlying Action
    Respondent Los Defensores, Inc. is an “attorney joint advertising group”
    that focuses on the Spanish speaking market in Southern California. Beginning in
    1984, respondent’s advertising included the telephone numbers “213-636-3636”
    and “714-636-3636.” Later, in 1988, respondent obtained the rights to the toll-
    free telephone number “1-800-636-3636,” which was incorporated into
    respondent’s advertising.
    In April 2009, respondent initiated the underlying action against appellants
    Armando Vera and Rosa Gomez. The first amended complaint, filed April 29,
    2009, contained claims for unfair business competition and “[p]assing [o]ff.”
    According to the complaint, Vera and Gomez owned the rights to phone numbers
    that closely resembled respondent’s toll-free number. The complaint further
    alleged that when callers mistakenly dialed Vera and Gomez’s numbers in an
    effort to contact respondent, Vera and Gomez intentionally referred them to
    attorneys not affiliated with respondent. In May 2010, the complaint was
    amended to name as “Doe” defendants appellants Donald C. Amamgbo and
    Amamgbo & Associates, P.L.C. (Amamgbo & Associates).
    2
    B. Respondent’s Initial Discovery Motions
    In July 2010, respondent filed two motions to compel discovery.
    Respondent requested an order directing the depositions of Vera and Gomez, who
    refused to appear at their depositions on the ground that they had received a
    bankruptcy discharge. Respondent contended that the bankruptcy discharge did
    not encompass its claims against Vera and Gomez, and that the automatic stay
    accompanying the bankruptcy proceedings ended with the discharge. 1 In addition,
    respondent sought an order compelling Vera and Gomez to respond to requests for
    the production of documents. Respondent asserted that Vera and Gomez provided
    no documents in response to the request. Both motions sought an award of
    sanctions.
    On October 19, 2010, the trial court granted the motions. Pursuant to a
    stipulation of the parties, the court ordered Vera and Gomez to produce responsive
    documents by October 26, 2010, and to appear for depositions in November 2010.
    The court awarded no sanctions.
    C. Second Amended Complaint
    On January 19, 2011, respondent filed its second amended complaint
    (SAC), which is the operative complaint in the action. The SAC asserts claims for
    unfair competition and “passing off’ under the common law, and a claim for
    violations of the unfair competition law (UCL) (Bus. & Prof. Code, § 17200 et
    seq.).
    1      Respondent also contended Gomez and Vera provided respondent with no notice
    of the bankruptcy proceedings prior to the discharge.
    3
    The SAC alleges the following facts: Since 1984, respondent’s advertising
    in Southern California has focused on the “easy-to-remember” string of numerals
    “636-3636,” as found in its toll-free number. Nearly all of respondent’s
    advertising uses that toll-free number. As a result of respondent’s substantial
    investment in advertising, which totaled more than $123 million since 1984,
    respondent’s “calling card” number 636-3636 gained “significant notoriety.” To
    determine the efficacy of the advertising, respondent asked members of “focus
    groups” whether they “knew of the telephone number of any []group of lawyers.”
    According to the SAC, “the overwhelming response [was] ‘636-3636.’”
    The SAC further alleges that Vera and Gomez, together with attorney
    Amamgbo and his law firm, entered into a “conspiracy scheme” in an effort to
    “ride [respondent’s] coattails.” They obtained the rights to several telephone
    numbers incorporating the “636-3636” string, including those in the 949, 626,
    818, 310, and 661 area codes. Due to the similarity between those numbers and
    respondent’s toll-free number, appellants receive calls from persons seeking
    respondent’s legal services. Rather than informing callers of their mistake,
    appellants “go [to] great lengths to avoid answering any questions about whether
    they are [respondent] or whether they have any affiliation with [respondent]. . . .
    [T]o deflect questioning . . . , [appellants] say they are ‘an office for lawyers’ or
    something equivalent to that effect in an attempt to implicitly pass themselves off
    as affiliated with [respondent].”
    According to the SAC, appellants’ intent was “to injure [respondent’s]
    business and usurp [respondent’s] good will,” and their wrongful conduct caused
    damages to respondent, as well as “actual mistakes, confusion, or deception of the
    general public.” The SAC requested an award of damages, including punitive
    damages, and “an accounting of [appellants’] unjust profits.” In addition, the SAC
    4
    sought preliminary and permanent injunctions barring appellants from using any
    telephone number incorporating the numerical string “636-3636.”
    D. Respondent’s Subsequent Discovery Motions
    In March 2011, respondent filed motions to compel discovery against Vera,
    Gomez, and Amamgbo & Associates. Respondent contended that Vera and
    Gomez had not responded to discovery propounded in November 2010, including
    interrogatories and requests for the inspection and production of documents. The
    motions noted, inter alia, that during Vera’s and Gomez’s depositions, they
    referred to a “status book” and a call log in which information regarding calls to
    their “636-3636” numbers was recorded. Vera and Gomez testified that they
    recorded caller information in a status book. In addition, Vera acknowledged that
    the cell phone associated with the “636-3636”s lines had a “call log” of incoming
    phone numbers, and appellants’ defense counsel, Robert C. Moest, promised to
    transcribe the numbers in it. According to respondent, Vera and Gomez failed to
    produce the status book and call log, despite respondent’s requests at the
    depositions and in the inspection demands. Respondent sought orders compelling
    the discovery and awarding sanctions.
    In addition, in a motion directed against Amamgbo & Associates,
    respondent contended that from June to December 2010, it propounded three
    rounds of discovery, including requests for admissions, form interrogatories,
    special interrogatories, and request for production of documents. According to
    respondent, Amamgbo & Associates failed to respond to many of the requests for
    admission and interrogatories, responded deficiently to the remaining requests for
    admission and interrogatories, and produced few of the requested documents.
    Respondent sought orders compelling Amamgbo & Associates to respond
    5
    adequately to the discovery, deeming certain requests for admission to be
    admitted, and awarding sanctions.
    In a two-page consolidated opposition, appellants’ defense counsel, Moest,
    stated: “[Appellants] concede that there is substantial overdue discovery, and that
    a number of errors were made in the form of the responses provided. [Appellants]
    are well along in the process of remedying the alleged deficiencies . . . .” The
    opposition challenged only the amount of sanctions requested by respondent,
    which totaled $15,000.
    On May 19, 2011, the trial court granted the motions against Gomez and
    Vera. The court granted the motion against Amamgbo & Associates insofar as it
    sought an order compelling discovery, but denied it insofar as it sought an order
    deeming certain requests for admission to be admitted.2 The court also awarded
    sanctions totaling $6,380 against Vera, Gomez, Amamgbo & Associates, and their
    counsel.
    E. Motions for a Preliminary Injunction and Discovery Sanctions
    In November 2011, respondent filed motions for a preliminary injunction
    and for discovery sanctions. Respondent sought an injunction barring appellants
    from using telephone numbers incorporating the numerical string “636-3636.”
    Respondent also requested the imposition of monetary, issue, or terminating
    2       We recognize that the minute order reflecting the May 19, 2011 rulings states that
    the motion against Amamgbo & Associates was granted in full, and that the motion
    against Gomez was denied to the extent it sought an order deeming certain requests for
    admission to be admitted. However, the minute order appears to contain a typographical
    error, as only the motion against Amamgbo & Associates sought relief for defective
    responses to requests for admission.
    6
    sanctions, arguing that appellants had engaged in significant misconduct during
    discovery, including the spoliation of evidence.
    1. Showings Regarding Motion for Preliminary Injunction
    In seeking a preliminary injunction, respondents submitted excerpts from
    appellants’ depositions and other evidence supporting the following version of the
    underlying facts: Vera was born in Peru, where he attended college, but obtained
    no degree. In 2000, after emigrating to the United States, Vera operated a car
    rental business, and obtained the rights to the “636-3636” telephone numbers in
    the 949, 626, 818, 310, and 661 areas codes for use in connection with that
    business. He soon discovered that callers asked him for legal services, and had the
    “big idea” that the numbers were more valuable to law firms than to a rental car
    company. Vera started “working for the attorneys,” and “gave [them] those lines
    so that [he] could work.”
    In 2007, Vera and Gomez, who were then married, were employed by
    attorney Les Sherman, who paid them $10,000 per month to use the telephone
    numbers. In mid-2007, Sherman sold his practice to attorney Amamgbo for
    approximately $300,000 after Sherman was charged with federal income tax
    evasion. Amamgbo continued to use the “636-3636” telephone numbers, and paid
    salaries to Vera and Gomez totaling approximately $12,800 per month.
    According to Amamgbo, the “636-3636” numbers rang on a particular cell
    phone that Vera possessed “99 percent of the time.” Vera and Gomez testified that
    their duties for Amamgbo consisted of answering calls on the “636-3636” lines,
    recording the callers’ information in a “status book,” and setting up appointments
    for callers. The callers were primarily Spanish speakers, and the majority sought
    legal services. According to Vera, when a caller sought an attorney, he wrote
    7
    down the caller’s information on a “piece of paper, or whatever is handy,” filled
    out “the paperwork that the attorney require[d],” and recorded the information in
    the status book.
    Vera and Gomez testified that they answered the calls by saying, “‘Law
    office. How can I help you?’” or simply, “‘Law offices.’” Nonetheless,
    respondent had received complaints from callers who used appellants’ “636-3636”
    telephone numbers. According to those complaints, the callers were told they had
    contacted respondent.
    After the inception of the underlying litigation, Vera and Gomez transferred
    their telephone company accounts for the “636-3636” numbers to Amamgbo. In
    September 2011, a California state bar court determined that Amamgbo had settled
    cases without his clients’ consent and forged their signatures. The state bar court
    recommended that the Supreme Court impose disciplinary measures, namely, a
    stayed one-year suspension and two years of probation. In addition, malpractice
    and fraud actions were then pending against Amamgbo.
    Appellants’ opposition to the request for a preliminary injunction offered
    no evidence. They argued, inter alia, that respondent had failed to assert claims
    warranting injunctive relief.
    2. Showings Regarding Motion for Discovery Sanctions
    In seeking discovery sanctions, respondent maintained that appellants had
    violated the trial court’s May 2011 discovery orders. Aside from monetary
    sanctions, respondent sought issue sanctions, including a determination of its
    damages, or alternatively, terminating sanctions in the form of the entry of
    appellants’ default. Regarding the request for issue sanctions, respondent asked
    for a ruling that its annual damages amounted to at least $1,051,596, and offered a
    8
    calculation that its advertising had effectively conferred annual benefits on
    appellants totaling as much as $2,631,443.72.
    Respondent submitted evidence that despite the May 2011 orders,
    appellants concealed or destroyed records regarding their “636-3636” telephone
    lines. Respondent noted that in November 2010, Vera and Gomez testified during
    their depositions that they entered caller information in a status book, and that
    missed phone calls were transferred to a voicemail system maintained by a central
    operator. After the depositions, respondent propounded discovery requests
    encompassing the status book and call log (or call logs) for the telephone lines, the
    voicemail system related to the lines, and the identity of the central operator of the
    voicemail system. Because appellants’ initial response to the requests consisted
    solely of objections, respondent sought the discovery orders issued on May 19,
    2011.
    According to respondent’s showing, following those orders, appellants
    produced no written documents or call logs regarding incoming calls on the “636-
    3636” lines. They provided only a privilege log concerning a single item they
    characterized as a “statute book,” the entire contents of which were purportedly
    subject to the attorney-client and work product privileges. Appellants also
    produced no recordings of incoming or outgoing voicemail messages, and denied
    the existence of a central operator.3 Respondent argued that appellants’ failure to
    produce any call logs or voicemail messages signified the potential destruction of
    evidence, as appellants had continued to use the phone lines after Vera disclosed
    the existence of the call logs and messages in his November 2010 deposition.
    3      In response to respondent’s request for outgoing voicemail messages, appellants
    provided only the untranslated text of a Spanish message that they stated had been used
    “for approximately one year.”
    9
    Respondent also submitted evidence that despite the May 2011 orders,
    appellants produced no financial records related to their “636-3636” telephone
    lines. Respondent noted that in 2010, it propounded a demand for inspection of
    documents on Amamgbo & Associates, seeking financial records from “any
    business” using one of appellants’ “636-3636” numbers. In addition, respondent
    asked Amamgbo & Associates to produce at its deposition financial records
    related to all the numbers. No financial records were provided in response to
    those requests, even though Amamgbo appeared at the deposition in November
    2010 and testified that he had “things [you] acquire[] in the normal course of
    business that you use for your tax returns and preparation, expenses, things of that
    nature.” Following the May 19, 2011 orders, Amamgbo & Associates again
    produced no financial records. Instead, it filed a supplemental response to
    respondent’s demand for inspection, claiming that no documents existed.4
    In addition, respondent submitted evidence that despite the May 2011
    orders, appellants declined to identify other attorneys who may have benefited
    from their “636-3636” telephone numbers. Respondent noted that in November
    2010, it asked Amamgbo & Associates to disclose the identities of attorneys with
    whom it had fee sharing agreements after Amamgbo & Associates began receiving
    calls on the “636-3636” lines. Amamgbo & Associates’ initial response consisted
    solely of objections. Following the May 2011 orders, Amamgbo & Associates
    acknowledged that it occasionally collaborated with other attorneys on a shared
    fee basis, but declined to provide the terms of the agreements or identify those
    4      According to respondent, appellants also failed to respond to requests for
    information regarding the use of their telephone numbers for the benefit of other
    attorneys.
    10
    attorneys, asserting that none of the pertinent clients had been “obtained through a
    ‘636’ call.”
    In opposing discovery sanctions, appellants contended they had fully
    responded to all discovery and had produced every relevant and non-privileged
    item. They denied any spoliation or destruction of evidence, arguing that
    respondent “misinterpreted deposition transcripts to evidence documents that
    never existed.” In addition, they noted that they had paid the discovery sanctions
    awarded in May 2011.
    Supporting the opposition were declarations from Vera and defense counsel
    Moest. Vera stated that he had produced all the documents and records in his
    possession, with the exception of the item listed in the privilege log. Moest
    maintained that appellants had fully complied with respondent’s discovery
    requests and the May 2011 orders, stating: “It is my understanding that none of
    the [appellants] herein kept records of calls received at any of the subject
    telephone numbers . . . . The written material [respondent] still complains of not
    receiving never existed, as far as I know, and my clients would have had to
    somehow make something up for [respondent], which I told them not to do.”
    3. Trial Court’s Rulings
    On November 29, 2011, following a hearing, the trial court determined that
    respondent was entitled to a preliminary injunction, concluding that respondent
    had shown that it was likely to prevail on the merits of its case at trial, and that the
    balance of potential harms to the parties favored respondent. In addition, the court
    imposed terminating sanctions on appellants in the form of the entry of their
    default, concluding that they had contravened its May 2011 orders. The court
    11
    stated that appellants’ conduct was “an extremely severe and aggravated failure to
    comply with [its] order[s], with substantial sanctions doing nothing.”
    F. Default Judgment
    In January 2012, respondent filed its “prove up” packet in support of a
    default judgment, which relied primarily on the evidence it had submitted in
    seeking a preliminary injunction. Respondent requested damages totaling
    $11,638,920, pointing to the discussion of damages presented in its motion for
    discovery sanctions. Later, in a supplemental brief requested by the trial court,
    respondent offered an alternative calculation of its total damages, which
    determined them to be at least $689,520.
    On April 9, 2012, following a hearing, the trial court entered a default
    judgment in favor of respondent and against appellants. The judgment awarded
    respondent $691,280 in damages, and included a permanent injunction barring
    appellants from using their “636-3636” telephone numbers. This appeal
    followed.5
    DISCUSSION
    Appellants contend (1) that the terminating sanctions were improper, (2)
    that the SAC stated no cause of action, (3) that they received inadequate notice of
    5      Respondent has filed a motion to augment the record with several documents, only
    two of which -- Exhibits 1 and 2 -- concern proceedings before the filing of the notice of
    appeal. As our review is properly limited to the rulings identified in that notice (Reserve
    Insurance Co. v. Pisciotta (1982) 
    30 Cal.3d 800
    , 813), we grant the motion solely with
    respect to Exhibits 1 and 2, and deny it with respect to the remaining documents.
    12
    respondents’ claimed damages, and (4) that respondent was awarded excessive
    damages. As explained below, we reject their contentions.
    A. Terminating Sanctions
    Appellants contend that the trial court erred in imposing terminating
    sanctions. They challenge the court’s finding that they willfully failed to comply
    with the May 2011 orders, arguing “[appellants] did not willfully disobey. It is not
    a matter of [appellants] not wanting to or not trying to comply. They were simply
    unable to produce documents that do not exist, were unable to preserve things that
    did not exist, and refused to manufacture evidence for the purpose of responding
    to discovery. They should not have been penalized as such.”
    1. Governing Principles
    “California discovery law authorizes a range of penalties for conduct
    amounting to ‘misuse of the discovery process,’” including terminating sanctions.
    (Doppes v. Bentley Motors, Inc. (2009) 
    174 Cal.App.4th 967
    , 991, quoting Code
    Civ. Proc., § 2023.030.) Misuses of the discovery process include the following:
    “(d) Failing to respond or to submit to an authorized method of discovery. [¶ (e)
    Making, without substantial justification, an unmeritorious objection to discovery.
    [¶] (f) Making an evasive response to discovery. [¶] (g) Disobeying a court order
    to provide discovery.” (Code Civ. Proc., § 2023.010.) Terminating sanctions may
    take the form of “[a]n order rendering a judgment by default against [the
    offending] party.” (Code. Civ. Proc., § 2023.030, subd. (d)(4).)
    “‘The power to impose discovery sanctions is a broad discretion subject to
    reversal only for arbitrary, capricious, or whimsical action.” (Do It Urself Moving
    & Storage, Inc. v. Brown, Leifer, Slatkin & Berns (1992) 
    7 Cal.App.4th 27
    , 36.)
    13
    The trial court may order a terminating sanction for discovery abuse “after
    considering the totality of the circumstances: [the] conduct of the party to
    determine if the actions were willful; the detriment to the propounding party; and
    the number of formal and informal attempts to obtain the discovery.” (Lang v.
    Hochman (2000) 
    77 Cal.App.4th 1225
    , 1246.) Generally, “[a] decision to order
    terminating sanctions should not be made lightly. But where a violation is willful,
    preceded by a history of abuse, and the evidence shows that less severe sanctions
    would not produce compliance with the discovery rules, the trial court is justified
    in imposing the ultimate sanction.” (Mileikowsky v. Tenet Healthsystem (2005)
    
    128 Cal.App.4th 262
    , 279-280.) Under this standard, trial courts have properly
    imposed terminating sanctions when parties have willfully disobeyed one or more
    discovery orders. (Lang v. Hochman, supra, 77 Cal.App.4th at pp. 1244-1246
    [discussing cases].)
    When the trial court’s exercise of its discretion relies on factual
    determinations, we examine the record for substantial evidence to support them.
    (Waicis v. Superior Court (1990) 
    226 Cal.App.3d 283
    , 287; see Miranda v. 21st
    Century Ins. Co. (2004) 
    117 Cal.App.4th 913
    , 929.) In this regard, “the power of
    an appellate court begins and ends with the determination as to whether, on the
    entire record, there is substantial evidence, contradicted or uncontradicted, which
    will support the determination [of the trier of fact].” (Bowers v. Bernards (1984)
    
    150 Cal.App.3d 870
    , 873-874, italics deleted.) These principles encompass our
    review of the court’s finding that appellants willfully violated its May 2011 orders.
    (Liberty Mutual Fire Ins. Co. v. LcL Administrators, Inc. (2008) 
    163 Cal.App.4th 1093
    , 1102-1104.)
    14
    2. Analysis
    We conclude there is sufficient evidence that appellants willfully failed to
    comply with the May 2011 orders. To begin, the record discloses ample evidence
    that despite the May 2011 orders, appellants willfully concealed or destroyed
    written documents and other records regarding phone calls on their “636-3636”
    telephone lines. In November 2010, Vera testified in his deposition that he wrote
    down caller information and prepared other paperwork “the attorney require[d]”
    before entering that information in the status book. In addition, during the
    deposition, Vera admitted that the cell phone connected to the “636-3636” lines
    had a call log that recorded incoming phone numbers. When respondent’s counsel
    asked to examine the call log, Moest declined to give him access to it, but agreed
    to transcribe the phone numbers on it.
    After Vera’s deposition, respondent propounded discovery seeking written
    and electronic records of incoming calls. However, following the May 2011
    orders, appellants provided none of the above-described documents and records
    identified during Vera’s deposition. In opposing respondent’s motion for
    discovery sanctions, appellants relied on declarations from Vera and Moest, who
    asserted that the documents “never existed.”
    Notwithstanding Vera’s and Moest’s declarations, the evidence before the
    trial court was sufficient to support its finding of willful noncompliance. On
    review for substantial evidence, we will affirm a finding predicated on the trial
    court’s rejection of a witness’s testimony, “unless it appears that there are no
    matters or circumstances [that ] . . . impair the accuracy of the testimony . . . .” (La
    Jolla Casa de Manana v. Hopkins (1950) 
    98 Cal.App.2d 339
    , 345.) When the
    underlying evidence consists of declarations, the rule applicable to our review “is
    the same as that governing oral testimony . . . .” (Hammel v. Lindner (1964) 224
    
    15 Cal.App.2d 426
    , 431-432.) Because Vera’s and Moest’s declarations contradicted
    Vera’s own deposition testimony, we find no error in the court’s determination
    that appellants’ showing was not credible.6
    For similar reasons, we conclude there is sufficient evidence that appellants
    willfully failed to comply with the May 19, 2011 orders in other respects. Even
    though Vera testified that missed phone calls were transferred to a voicemail
    system maintained by a central operator, appellants produced no recordings of
    incoming or outgoing voicemail messages, and neither identified nor provided
    documents related to the system’s central operator. Appellants also produced no
    financial records related to their “636-3636” telephone lines, although Amamgbo
    testified that he had records “acquire[d] in the normal course of business,” and
    appellants otherwise admitted in discovery that Amamgbo & Associates was
    responsible for paying for the lines. In addition, appellants never identified any of
    the attorneys with whom they admittedly had fee sharing agreements or the terms
    of such agreements, after Amamgbo & Associates began receiving calls on the
    “636-3636” lines. In sum, because there is sufficient evidence that appellants
    willfully violated the May 2011 orders in several ways, the trial court did not
    abuse its discretion in imposing terminating sanctions.
    6      On a related matter, we note that the trial court, in imposing terminating sanctions,
    also concluded that appellant’s privilege log regarding the “statute book” was “not in
    proper form,” and amounted to an “evasion of the [c]ourt’s orders.” Because appellants
    do not challenge this determination on appeal, they have forfeited any contention of error
    regarding it.
    16
    B. Adequacy of the Complaint
    Appellants contend the default judgment is invalid because the SAC states
    no claim. They argue that the allegations in the SAC assert no claims supporting
    the damages and injunctive relief awarded in the judgment.
    1. Governing Principles
    Generally, a defendant in default “confesses the material allegations of the
    complaint. [Citation.]” (Taliaferro v. Davis (1963) 
    216 Cal.App.2d 398
    , 408-
    409.) Nonetheless, the trial court may not enter a default judgment when the
    complaint’s allegations do not state a cause of action. (Id. at pp. 408-414;
    Taliaferro v. Taliaferro (1959) 
    171 Cal.App.2d 1
    , 3-9.) No judgment can rest on
    such a complaint, as a defendant in default “‘admits only facts that are well
    pleaded.’” (Falahati v. Kondo (2005) 
    127 Cal.App.4th 823
    , 829, quoting 6
    Witkin, Cal. Procedure (4th ed. 1997) Proceedings Without Trial, § 160, p. 574;
    Buck v. Morrossis (1952) 
    114 Cal.App.2d 461
    , 466.)
    Our inquiry here into the complaint’s adequacy is akin to that triggered by a
    general demurrer, namely, whether the complaint lacks factual allegations
    indispensable to the asserted claims. (Zucco v. Farullo (1918) 
    37 Cal.App. 562
    ,
    564; Alexander v. McDow (1895) 
    108 Cal. 25
    , 29.) A court must indulge
    reasonable inferences in support of the factual allegations in the complaint; mere
    uncertainties and other defects subject to a special demurrer do not bar a default
    judgment against the defendant. (Buck v. Morrosis, supra, 114 Cal.App.2d at
    p. 466; see Price v. Hibbs (1964) 
    225 Cal.App.2d 209
    , 218.) Nonetheless, the
    absence of essential factual allegations is fatal to a judgment against the defendant.
    (See Falahati v. Kondo, supra, 127 Cal.App.4th at p. 830 [complaint contained no
    17
    factual allegations regarding defaulting defendant, who was mentioned only in
    caption].)
    2. Unfair Competition and “Passing Off”
    The SAC purports to assert claims under the common law for unfair
    competition and “passing off,” as well as a statutory claim for unfair competition
    under the UCL. Under these claims, the SAC seeks damages, including recovery
    of appellants’ “unjust profits,” and injunctive relief. Because damages are
    unavailable as a remedy under the UCL (Clark v. Superior Court (2010) 
    50 Cal.4th 605
    , 610), we focus our inquiry on the common law claims.7
    Although the term “unfair competition” applies to several types of
    misconduct (Balboa Ins. Co. v. Trans Global Equities (1990) 
    218 Cal.App.3d 1327
    , 1341-1343), the tort of unfair competition pertinent here is “the act of
    ‘passing off’ one’s goods as those of another.” (Bank of the West v. Superior
    Court (1992) 
    2 Cal.4th 1254
    , 1263.) That tort “developed as a equitable remedy
    against the wrongful exploitation of trade names and common law trademarks that
    were not otherwise entitled to legal protection.” (Ibid.) Injunctive relief and
    damages are available for common law unfair competition involving fraud or an
    intent to mislead consumers. (Modesto Creamery v. Stanislaus Creamery Co.
    (1914) 
    168 Cal. 289
    , 291-292 (Modesto Creamery); see also Gordon v. Warner
    Bros. Pictures, Inc. (1969) 
    269 Cal.App.2d 31
    , 39 [injunctive relief and damages
    available for unfair competition when defendant’s conduct is fraudulent]; Wood v.
    7       The UCL defines “unfair competition” to include “any unlawful, unfair or
    fraudulent business act or practice.” (Bus. & Prof. Code, § 17200.) Under the UCL,
    damages cannot be recovered, and plaintiffs are generally limited to injunctive relief and
    restitution. (Clark v. Superior Court, supra, 50 Cal.4th at p. 610.)
    18
    Peffer (1942) 
    55 Cal.App.2d 116
    , 125 [in cases of unfair competition, injunctive
    relief and accounting of wrongful profits available upon a showing of fraud or
    intent to divert the plaintiff’s business by unlawful means].)
    “The purpose of the equitable doctrine is to prevent unfair competition
    through misleading or deceptive use of a term exclusively identified with the
    claimant’s product and business [citation], affording judicial protection whenever
    ‘the name and the business [through continued association] become synonymous
    in the public mind; and submerges the primary meaning of the name . . . in favor
    of its meaning as a word identifying that business.’ [Citation.] The crucial
    element is the mental association in the buyer’s mind between the mark used in
    connection with the product and a single source of origin.” (North Carolina Dairy
    Foundation, Inc. v. Foremost-Mckesson, Inc. (1979) 
    92 Cal.App.3d 98
    , 108 (North
    Carolina Dairy Foundation), quoting Visser v. Macres (1963) 
    214 Cal.App.2d 249
    , 253.)
    Under the doctrine, even a term or mark with a common meaning may
    trigger the crucial mental association when it acquires a “secondary meaning,” that
    is, becomes identified in “the relevant marketplace” with a product from “a unique
    or particular source.” (North Carolina Dairy Foundation, supra, 92 Cal.App.3d at
    pp. 107-108.) The development of that secondary meaning does not require “that
    the buyer must actually know the name of the source[,] but only that the buyer
    directly associate the mark with but one, though, anonymous, source.” (Id. at
    p. 108.) Thus, “‘secondary meaning is a shorthand phrase which describes the
    existence of conditions from which public confusion will flow if the defendant is
    permitted to pursue his deceptive scheme [citation]. If words have been used or
    employed . . . in such a manner that the public has learned to associate them with
    the thing described, they acquire a secondary meaning [citation]. . . . If an
    19
    association is thereby formed in the minds of the public which fixes plaintiffs as
    the source of something of a particular nature to be available in a particular place,
    this is sufficient . . . .’” (Id. at pp. 108-109, quoting Metro-Goldwyn-Mayer, Inc.
    v. Lee (1963) 
    212 Cal.App.2d 23
    , 30.)
    The common law tort of unfair competition has long been recognized in
    California. An instructive decision is Modesto Creamery. There, the plaintiff, a
    creamery located in Modesto, sold butter in wrappers bearing the word “Modesto.”
    (Modesto Creamery, supra, 168 Cal. at p. 291.) After ten years, the defendant
    began selling butter in similar wrappers in the same area. (Ibid.) When the
    plaintiff sued the defendant, the trial court awarded the plaintiff damages and
    injunctive relief. (Ibid.) The court found that the word “Modesto,” as used by the
    plaintiff, had acquired “‘a special significance and secondary meaning apart from
    its geographical sense,’” and had come to signify the plaintiff’s butter; in addition,
    the court found that the defendant acted with the intent to mislead customers.
    (Id. at pp. 291-292.) Our Supreme Court affirmed the judgment, concluding that
    the plaintiff was entitled to an injunction, an accounting to determine the
    defendants’ profits from its misconduct, and an award of those profits. (Id. at pp.
    292-295.)
    3. Analysis
    Although our research has disclosed no California decision holding that an
    action for common law unfair competition is properly predicated on the use of
    business telephone numbers, we find guidance from Cytanovich Reading Center v.
    The Reading Game (1984) 
    162 Cal.App.3d 107
     (Cytanovich). There, the plaintiff
    and defendant provided reading improvement services in the same community.
    (Id. at p. 109.) The plaintiff adopted as its business telephone number “321-
    20
    7323,” and incorporated the number in its advertising in the alphanumerical form
    “321-READ.” (Ibid.) Soon afterward, the defendant began using the telephone
    number “494-7323,” and displayed it in advertising in the alphanumerical form
    “494-READ.” (Ibid.) When the plaintiff filed an action against the defendant for
    unfair competition and trademark infringement, the trial court initially ordered a
    preliminary injunction, but ultimately issued a judgment in favor of the defendant
    and against the plaintiff. (Id. at p. 110.)
    On appeal, the plaintiff contended the defendant had engaged in unfair
    competition. (Cytanovich, supra, 162 Cal.App.3d at p. 110.) The appellate court
    concluded that “the use of such telephone numbers may provide the basis for a
    claim of unfair competition, at least under circumstances similar to those
    suggested in the present case. Basic and essential to such a determination by a
    trial court . . . are its factual findings and conclusions as to material considerations
    such as these: Whether there is some imitation of the telephone number associated
    with a particular service; whether the telephone number represents a somewhat
    novel or distinctive use; whether the telephone number imitated has received some
    significant prior use; whether a largely coterminous or at least competitive service
    area is involved; whether there is a likelihood that the ordinary public will be
    deceived; and, if the alphanumeric representation is generic or descriptive,
    whether it has acquired a secondary meaning such that a substantial segment of the
    purchasing public associates the symbol with the original, single source of a given
    service.” (Id. at p. 114.) The appellate court nonetheless declined to reverse the
    judgment, as the record on appeal was insufficient to show that the trial court’s
    implied findings regarding these matters were erroneous. (Id. at pp. 114-115.)
    In view of Cytanovich, we conclude that unfair competition claims may be
    founded on the use of business telephone numbers, provided that facts sufficient to
    21
    establish unfair competition are present. (See also Dial-A-Mattress Franchise
    Corp. v. Page (2d Cir. 1989) 
    880 F.2d 675
    , 677 [under federal and state unfair
    competition laws, merchant whose advertising had long displayed local phone
    numbers containing alphanumerical string “‘MATTRES’” was entitled to
    injunction against rival using “800” number containing that string].) As noted
    above, unfair competition ordinarily involves the existence of a secondary
    meaning -- that is, a “mental association in the buyer’s mind between the mark
    used in connection with the product and a single source of origin”-- and a
    “‘deceptive scheme’” that exploits that secondary meaning. (North Carolina
    Dairy Foundation, supra, 92 Cal.App.3d at pp. 107-108.) Furthermore, damages
    and injunctive relief are proper when there is fraud or an intent to mislead.
    (Modesto Creamery, supra, 168 Cal. at pp. 291-292; Gordon v. Warner Bros.
    Pictures, Inc., supra, 269 Cal.App.2d at p. 39; Wood v. Peffer, supra, 55
    Cal.App.2d at p. 125.)
    Here, the SAC asserts those key facts. The SAC alleges that since 1984,
    respondent’s advertising incorporated the easy-to-remember numerical string
    “636-3636,” as found in its toll-free number; that the numerical string thus
    acquired “significant notoriety,” and was associated with respondent by consumers
    in respondent’s target market; that appellants intentionally used telephone
    numbers incorporating the “636-3636” string to pass themselves off as affiliated
    with respondent; and that they engaged in misleading conduct to avoid informing
    callers that they were not so affiliated. Although the similarity between
    respondent’s toll-free number and appellants’ numbers resides simply in a
    numerical string, rather than in an alphanumerical mnemonic term (such as
    “READ”), the SAC asserts that the “easy-to-remember” numerical string has
    22
    acquired the requisite secondary meaning, and that appellants intentionally
    engaged in a deceptive scheme to exploit that meaning.
    We recognize that although the SAC alleges that appellants were aware that
    callers sought respondent’s services, it contains no allegation that appellants
    affirmatively represented themselves as respondent. Nonetheless, concealment or
    partial suppression of material facts constitutes fraud when there is a duty to
    disclose those facts. (LiMandri v. Judkins (1997) 
    52 Cal.App.4th 326
    , 336.) The
    duty to disclose generally requires a relationship grounded in “some sort of
    transaction between the parties. [Citations.] Thus, a duty to disclose may arise
    from the relationship between seller and buyer, employer and prospective
    employee, doctor and patient, or parties entering into any kind of contractual
    agreement. [Citation.]” (Id. at pp. 336-337, italics omitted.) As the SAC asserts
    the existence of such a relationship between callers and appellants, it adequately
    alleges that appellants engaged in fraudulent conduct. We therefore conclude that
    the SAC states an unfair competition claim for damages and injunctive relief.
    Appellants contend the unfair competition claim is premised on the “flawed
    theory” that respondent has rights of ownership or control over appellants’ own
    telephone numbers. We disagree. Respondent’s claim is predicated not on its
    ownership or control of phone numbers containing the pertinent numerical string,
    but on its right to prevent deceptive conduct aimed at consumers by exploiting the
    numerical string after it has acquired a secondary meaning. (Modesto Creamery,
    supra, 168 Cal. at p. 293.) As our Supreme Court has explained, an unfair
    competition claim “‘does not depend on the ownership by the plaintiffs of any
    particular word, phrase, or device, as a trademark. . . . The right of action in such
    a case arises from the fraudulent purpose and conduct of the defendant and the
    injury caused to the plaintiffs thereby, and it exists independently of the law
    23
    regulating trademarks or of the ownership of such trademark by the plaintiffs. The
    gist of such an action is not the appropriation and use of another’s trademark, but
    the fraudulent injury to and appropriation of another’s trade.’” (Ibid., quoting
    Banzhaf v. Chase (1907) 
    150 Cal. 180
    , 183)
    Appellants’ reliance on Holiday Inns, Inc. v. 800 Reservation Inc. (6th Cir.
    1996) 
    86 F.3d 619
     (Holiday Inns) and Dranoff-Perlstein Assocs. v. Sklar (3d Cir.
    1992) 
    967 F.2d 852
     (Dranoff-Perlstein Assocs.) is misplaced. In Holiday Inns, a
    hotel chain asserted unfair competition and trademark infringement claims under
    the Lanham Act (
    15 U.S.C. §§ 1114
    , 1125) against a reservation service, alleging
    that the service used a phone number that customers often misdialed when
    attempting to contact the hotel chain via its “800” number. (86 F.3d at pp. 620-
    621.) After the hotel chain secured summary judgment on its claims, the Sixth
    Circuit reversed, concluding there was no evidence that the reservation service
    created or promoted consumer confusion. (Id. at pp. 622-626.) The Sixth Circuit
    noted there was evidence that the reservation service tried to dispel confusion by a
    recorded message informing callers that they had not reached the hotel chain.
    (Ibid.) In contrast, the SAC alleges that appellants intentionally avoided
    dispelling consumer confusion, and exploited it to their own advantage.
    In Dranoff-Perlstein Assocs., the plaintiff and defendant practiced personal
    injury law in the same area. (Dranoff-Perlstein Assocs., supra, 
    967 F.2d 852
     at
    p. 853.) After the plaintiff advertised a business telephone number containing the
    alphanumerical string “INJURY-1,” the defendant advertised a similar number
    containing the alphanumerical string “INJURY-9.” (Id. at pp. 853-854.) When
    the plaintiff asserted unfair competition and trademark infringement claims under
    the Lanham Act against the defendant, the trial court granted summary judgment
    in the defendant’s favor. (Dranoff-Perlstein Assocs., supra, at p. 854.) The Third
    24
    Circuit reversed the summary judgment, reasoning that there were triable issues of
    fact whether the alphanumerical string “INJURY-1” had a secondary meaning
    sufficient for Lanham Act claims. (Id. at pp. 860-863.) In so concluding, the
    Third Circuit determined that the alphanumerical string “INJURY,” viewed in
    isolation, supported no such claims because it was generic, that is, it spelled out a
    generally known term descriptive of the parties’ legal services. (Id. at pp. 861-
    862.)
    That is not true, however, of the numerical string “636-3636,” which has no
    common descriptive meaning related to legal services. Rather, respondent’s unfair
    competition claim relies on the allegation that the “easy-to-remember” numerical
    string had acquired a secondary meaning designating respondent’s services due to
    its advertising. In sum, we conclude that the SAC asserts claims sufficient to
    support the judgment.
    C. Notice of Amount of Damages
    Pointing to Code of Civil Procedure section 580, appellants contend the trial
    court erred in issuing a default judgment awarding damages, because the SAC
    does not allege the amount of respondent’s damages. For the reasons explained
    below, their contention fails, as respondent served a predefault notice specifying
    the amount of its damages.
    1. Governing Principles
    Subdivision (a) of Code of Civil Procedure section 580 provides that “[t]he
    relief granted to the plaintiff, if there is no answer, cannot exceed that demanded
    in the complaint . . . .” Generally, “the primary purpose of the section is to
    guarantee defaulting parties adequate notice of the maximum judgment that may
    25
    be assessed against them.” (Greenup v. Rodman (1986) 
    42 Cal.3d 822
    , 826
    (Greenup).) Because the statutory notice requirement is intended to ensure
    “‘fundamental fairness,’” it is subject to “strict construction.” (Ibid., quoting
    Becker v. S.P.V. Construction Co. (1980) 
    27 Cal.3d 489
    , 494 (Becker).) The
    requirement is thus applicable in cases in which the defendant’s default is ordered
    as a discovery sanction. (Greenup, supra, 42 Cal.3d at p. 829.)
    The notice requirement is nonetheless subject to at least two exceptions.
    The first arises in cases involving statutory prohibitions of a statement of the
    amount of damages in the complaint. Under Code of Civil Procedure section
    425.10, subdivision (b), a complaint in an action for personal injury or wrongful
    death may not state the amount of damages. Similarly, under Civil Code section
    3295, subdivision (e), a complaint may not state the amount of punitive damages
    sought. In such cases, Code of Civil Procedure section 425.11, subdivision (b),
    and section 425.115, subdivision (b), permit the service of notices on the
    defendant stating the amounts of the plaintiff’s compensatory and punitive
    damages. Under Code of Civil Procedure section 580, subdivision (a), those
    notices establish the maximum amount of a default judgment against the
    defendant, if properly served before the entry of default. (Van Sickle v. Gilbert
    (2011) 
    196 Cal.App.4th 1495
    , 1520-1521 (Van Sickle).)
    The notice requirement is also subject to an exception in actions in which an
    accounting is sought. The leading case regarding this exception is Ely v. Gray
    (1990) 
    224 Cal.App.3d 1257
     (Ely). There, the plaintiff sued the defendant,
    seeking the dissolution of two partnerships in which they had participated, along
    with an accounting. (Id. at p. 1260.) The complaint did not specify the amount
    due the plaintiff. (Ibid.) When the defendant failed to answer the complaint, the
    26
    court ordered the entry of his default and rendered a default judgment in favor of
    the plaintiff for $44,618.44. (Ibid.)
    On appeal, the defendant contended the judgment was void because the
    complaint contained no allegation specifying the amount due the plaintiff. (Ely,
    supra, 224 Cal.App.3d at p. 1259.) The appellate court observed that the notice
    requirement in Code of Civil Procedure section 580, subdivision (a), places
    plaintiffs seeking an accounting “in a bind,” as the presence of allegations in a
    complaint specifying an amount due ordinarily undermines a prayer for an
    accounting. (Ely, supra, at pp. 1261-1262.) To resolve that conundrum, the court
    looked to the statutory scheme governing the first exception to the notice
    requirement. The court concluded: “By analogy [with those statutes], . . . a
    plaintiff who seeks an accounting has the solution of [a] postcomplaint and
    predefault notice to the defendant of the amount the plaintiff will seek to prove
    due him if the defendant defaults. As with Code of Civil Procedure section
    425.11, the notice must be given with adequate time for the defendant to respond
    before a default is entered.” (Ely, supra, at p. 1263.) Turning to the case before it,
    the appellate court reversed the judgment, as the plaintiff had provided no such
    notice to the defendant. (Id. at pp. 1263-1264.)
    Following Ely, a division of opinion has arisen regarding whether a plaintiff
    seeking an accounting must provide a predefault notice of the amount due. In
    Cassel v. Sullivan, Roche & Johnson (1999) 
    76 Cal.App.4th 1157
    , 1159-1160
    (Cassel), an attorney filed an action against a legal partnership in which he had
    participated, seeking an accounting and a valuation of his interest in the
    partnership. His complaint specifically alleged that the partnership possessed the
    financial records needed to determine that interest. (Id. at p. 1159.) After the
    partnership failed to answer the complaint, its default was entered and a judgment
    27
    for $305,690 was issued in the attorney’s favor. (Id. at p. 1160.) Before the trial
    court, the partnership challenged the judgment, arguing that the attorney never
    served the notice required under Ely. (Ibid.) The trial court set aside the
    judgment, permitted the attorney to serve a notice of the amount due, and rendered
    a second default judgment for $305,690 in the attorney’s favor. (Ibid.)
    On appeal, the partnership contended that both judgments were void
    because no notice of the amount due had been served prior to the entry of default.
    (Cassel, supra, 76 Cal.App.4th at p. 1157.) In rejecting that contention, the
    appellate court concluded that the holding in Ely requiring such a notice was not
    “analytically sound.” (Id. at p. 1164.) The court stated: “We hold that in an
    action seeking to account for and value a former partner’s partnership interest and
    for payment of that interest, the complaint need only specify the type of relief
    requested, and not the specific dollar amount sought. We foresee no danger that
    defaulting defendants will be taken by surprise by judgments entered against them,
    because . . . they will be in possession of the essential information necessary to
    calculate their potential exposure.” (Id. at pp. 1163-1164.) The court thus ordered
    the second judgment vacated and the first judgment reinstated. (Id. at p. 1164.)
    In Van Sickle, supra, 196 Cal.App.4th at p. 1527, the appellate court
    rejected Cassel in favor of Ely. There, the former client of an attorney sued him
    for breach of fiduciary duty, alleging that he had mismanaged property she had
    obtained in a divorce. (Id. at pp. 1500-1503.) Her complaint sought an
    accounting and contained no demand for a specific amount of money. (Ibid.) She
    also provided no statement of an amount due her before the trial court ordered the
    entry of a default judgment against the attorney for discovery misconduct. (Ibid.)
    In reversing the default judgment, the appellate court distinguished Cassel, noting
    that the complaint in that action -- unlike the client’s complaint -- alleged that the
    28
    defendant possessed the records necessary to assess the value of the potential
    judgment. (Id. at pp. 1526-1527.) The appellate court further stated that even if
    Cassel were not factually distinguishable, it would apply Ely, which it viewed as
    correctly decided. (Id. at p. 1527.)
    2. Analysis
    It is unnecessary for us to resolve this division of opinion, as the default
    judgment against appellant was proper under both Ely and Cassel. As explained
    below, the SAC adequately pleaded a request for an accounting, and respondent
    served a predefault notice of an amount due.8
    “An action for an accounting is equitable in nature. It may be brought to
    compel the defendant to account to the plaintiff for money or property, (1) where a
    fiduciary relationship exists between the parties, or (2) where, even though no
    fiduciary relationship exists, the accounts are so complicated that an ordinary legal
    action demanding a fixed sum is impracticable. [Citations].” (5 Witkin, Cal.
    Procedure (2008) Pleading, § 819, p. 236; see Civic Western Corp. v. Zila
    Industries, Inc. (1977) 
    66 Cal.App.3d 1
    , 14.) To plead a request for an
    accounting, a complaint “need only state facts showing the existence of the
    8      We note that the decisions upon which appellants rely are factually distinguishable,
    as none involved an action for an accounting. (Greenup, supra, 42 Cal.3d at pp. 826-831
    [modifying damages awarded in default judgment entered as discovery sanction in
    personal injury action because plaintiff served no notice of damages]; Becker, supra, 27
    Cal.3d at pp. 492-495 [modifying default judgment to reflect amount of damages
    specified in complaint]; Gudarov v. Hadjieff (1952) 
    38 Cal.2d 412
    , 416 [modifying
    default judgment awarding punitive damages not requested in complaint]; Burtnett v.
    King (1949) 
    33 Cal.2d 805
    , 806-811 [reversing default judgment that awarded property
    rights not specified as potential relief in complaint].)
    29
    relationship which requires an accounting and the statement that some balance is
    due the plaintiff.” (Brea v. McGlashan (1934) 
    3 Cal.App.2d 454
    , 460.)
    The SAC satisfies those requirements. As explained above (see pt. B.3.),
    the SAC states a common law claim for unfair competition in the form of “passing
    off.” Furthermore, the SAC requests an award of damages and “an accounting of
    [appellants’] unjust profits.” Generally, under the common law, an accounting of
    the defendant’s wrongful profits is available for unfair competition when the
    defendant intended to cause consumer confusion. (Rest.3d Unfair Competition,
    § 37.) In Modesto Creamery, our Supreme Court held that the plaintiff was
    entitled to an accounting for lost profits under factual circumstances similar to
    those alleged in the SAC. (Modesto Creamery, supra, 168 Cal. at pp. 292-295.)
    We therefore conclude that the SAC adequately pleads a request for an
    accounting.
    The record further discloses that prior to the entry of appellants’ default,
    respondent gave them notice of the amount of damages it sought. Respondent’s
    motion for discovery sanctions stated that appellants had been using their “636-
    3636” telephone numbers since 2007. Moreover, in seeking issues sanctions, the
    motion stated: “[Respondent] propounded discovery requests for [Amamgbo &
    Associates’s] financial records and information in order to determine the amount
    of damages in this case, i.e., the amount of money [appellants] wrongfully profited
    from their use of the infringing phone numbers. . . . Due to [Amamgbo &
    Associates’s] refusal to provide any of the documents requested that would
    substantiate these figures, [respondent] seeks an order . . . deeming the damages in
    this case to amount to at least $1,051,596.00 per year.” (Italics added.) In an
    effort to support that estimate of damages, respondent offered a calculation of the
    benefits appellants had derived from respondent’s advertising expenditures.
    30
    According to the calculation, the value of those benefits was approximately
    $2,631,443.72 per year.
    In our view, respondent’s request satisfied the requirement stated in Ely for
    a predefault notice akin to that specified in Code of Civil Procedure section
    425.11, subdivision (b). Under that statute, a statement of damages must “set[]
    forth the nature and amount of the damages being sought.” Respondent’s request
    supplied that information, as it sought an order determining that appellant’s
    “wrongful[]” profits amounted to at least $1,051,596.00 per year since 2007.9
    Furthermore, because respondent served the motion for sanctions 27 days before
    the trial court ordered the entry of a default judgment, appellants received
    reasonable notice of the damages sought. (See Schwab v. Southern California Gas
    Co. (2004) 
    114 Cal.App.4th 1308
    , 1323 [defendant had reasonable notice when
    served with statement of damages 15 days prior to entry of default].) We therefore
    reject appellant’s contention that the judgment is defective because the SAC does
    not specify the amount of respondent’s damages.
    D. Amount of Damages
    Appellants contend the damages awarded in the default judgment are
    excessive. They argue that the $691,280 award of damages “ha[s] absolutely
    nothing to do with [their] profits,” and is not supported by the evidence presented
    in respondent’s “prove up” packet. We reject their contentions.
    9      Appellants suggest that respondent’s explanation of its estimate of the amount of
    wrongful profits was defective or insufficient. However, as subdivision (b) of Code of
    Civil Procedure section 425.11 requires no explanation for the estimate of the amount of
    damages sought, that portion of respondent’s request was superfluous, for purposes of
    notice of the damages demanded.
    31
    Generally, in cases of unfair competition, “the profit made by the wrongdoer
    is a proper element of damage.” (Ojala v. Bohlin (1960) 
    178 Cal.App.2d 292
    ,
    302; Modesto Creamery, supra, 168 Cal. at pp. 294-295.) Under the rule of
    damages for unfair competition, the plaintiff “‘is entitled to all the profit which
    was in fact realized.’” (Ojala v. Bohlin, supra, 178 Cal.App.2d at p. 302, quoting
    Graham v. Plate (1871) 
    40 Cal. 593
    , 598.) Ordinarily, the plaintiff may recover
    only the defendant’s net profits attributable to the wrongful conduct. (Rest.3d
    Unfair Competition, §37, com. g, p. 400.) Nonetheless, “[t]he defendant bears the
    burden of proving any costs or expenses to be deducted from gross income in
    calculating net profit.” (Ibid.)
    Here, respondent’s “prove up” packet initially sought damages totaling
    $11,638,920. Noting that appellants’ failure to provide any financial records
    “undermined [respondent’s] ability to calculate [their] unjust profits,” respondent
    argued that it was entitled to “restitutionary or compensatory damages” based on
    the calculations in its motion for discovery sanctions. According to those
    calculations, appellants had received the benefits of advertising valued at
    $2,631,443,72 per year since 2007, resulting in damages totaling $11,638,920.
    Later, in a supplemental brief requested by the trial court, respondent
    offered an alternative calculation of its damages, which determined them to be at
    least $689,520. The alternative calculation relied on the payments Vera and
    Gomez had received from Amamgbo and his law firm. Respondent offered
    evidence that appellants engaged in their wrongful conduct for at least 4.42 years,
    during which Vera and Gomez received funds totaling $156,000, based on their
    testimony that Vera received $10,000 per month and Gomez received $700 per
    week. Respondent maintained that it was entitled to recover at least $689,520,
    32
    which represented the total funds paid to Vera and Gomez during the 4.42 year
    period.
    In support of this estimate, respondent argued: “If [Amamgbo &
    Associates] was willing to pay . . . Gomez and Vera $156,000 annually essentially
    for use of the [“636-3636”] numbers, it clearly was making significantly more than
    that amount from its use of the numbers. Thus, [appellants] themselves through
    their actions have demonstrated that the use of the [“636-3636”] numbers [is]
    easily worth over $156,000 per year.”
    At the hearing on respondent’s request for a default judgment, the trial court
    rejected respondent’s demand for $11,638,920 in damages, and instead determined
    that respondent was entitled to $691,280 in damages. In so doing, the court
    apparently concluded that the payments to Vera and Gomez provided an adequate
    basis for a determination of appellants’ net profits, as the court noted those
    payments in announcing its rulings. We further observe that the court’s award of
    damages closely tracks Vera’s and Gomez’s testimony regarding the payments.
    Because Gomez was paid $700 per week, she received $36,400 per year (based on
    a 52-week year). As Vera was paid $120,000 per year ($10,000 per month for 12
    months), they jointly received $156,400 per year. Accordingly, during the 4.42
    year period, they were paid funds totaling $691,288, which is effectively the
    amount of damages awarded in the judgment.
    We see no error in the trial court’s determinations, as funds that a defendant
    receives for carrying out unfair competition constitute a portion of the net profits
    from that tortious conduct. For purposes of determining the net profits from unfair
    competition, “[t]he value of the defendant’s own labor . . . , and salaries or wages
    paid to persons responsible for the tortious conduct, are not ordinarily deductible”
    from gross income or profits. (Rest.3d Unfair Competition, § 37, com. g, p. 400.)
    33
    This is because the contrary rule would effectively require plaintiffs to pay
    defendants for their intentional wrongful conduct. (4 Callman, Unfair
    Competition, Trademarks and Monopolies (4th ed. 2010) § 23:62, pp. 23-657–23-
    658.)
    In view of the allegations in the SAC and respondent’s “prove up” showing,
    the trial court reasonably concluded that Vera and Gomez were paid “salaries”
    solely for their efforts in effectuating the tortious scheme, that is, providing the
    “636-3636” lines, receiving calls on the lines, and directing callers to Amamgbo
    and his law firm. The trial court’s award of damages thus represents a
    conservative estimate of appellants’ collective net profits. In sum, the damages
    awarded in the judgment were not excessive.10
    10     Appellants suggest that the award of damages cannot be based on the payments to
    Vera and Gomez for the full 4.42 year period because Vera and Gomez received a
    bankruptcy discharge in July 2010, approximately 16 months before the trial court issued
    the preliminary injunction. As appellants offer no argument (with citation to appropriate
    legal authorities) that the bankruptcy discharge limited their liability for damages, they
    have forfeited any such contention. (OCM Principal Opportunities Fund, L.P. v. CIBC
    World Markets Corp. (2007) 
    157 Cal.App.4th 835
    , 844, fn. 3.)
    34
    DISPOSITION
    The judgment is affirmed. Respondent is awarded its costs on appeal.
    CERTIFIED FOR PUBLICATION
    MANELLA, J.
    We concur:
    WILLHITE, Acting P. J.
    EDMON, J.*
    *Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to
    article VI, section 6 of the California Constitution.
    35
    

Document Info

Docket Number: B240725

Citation Numbers: 223 Cal. App. 4th 377

Judges: Maneela

Filed Date: 1/24/2014

Precedential Status: Precedential

Modified Date: 8/31/2023