California’s employers often express frustration that the civil justice system does not seem to have adequate protections to discourage employees from filing legal claims based on alleged “facts” that the employee knows to be absolutely false.

Rule 11 of the Federal Rules of Civil Procedure, and section 128.7 of the California Code of Civil Procedure, are both intended to prevent such abuses.

Both statutes require that attorneys, in essence, verify whenever they sign and file court papers that there is a reasonable and good faith basis for the factual allegations stated in their papers. That belief must be based on a reasonable pre-filing investigation that consists of more than simply accepting as true what the attorney’s client says. Under both Rule 11 and section 128.7, an attorney who is found not to have complied with their obligations may be subject to monetary sanctions by the trial court.

Unfortunately, in real-world practice, those gateway requirements, which are intended to protect the integrity and public trust in our civil justice system and its procedures, seem rarely invoked by trial judges to hold dishonest claimants and their attorneys to account. Many casual observers of our modern legal processes marvel at the apparent ease with which a claimant may bring false claims, including those under oath, with no apparent repercussion or effective deterrent. Some even question whether a justice system predicated on a party’s promise to tell the truth is not archaic, as one’s “word, “honor,” or “bind” often do not seem as important in today’s world as they once were.

Every employer should be aware that it need not have the equivalent of the secret formula for Coca Cola, or commercially valuable source code, in order to have a trade secret that is protected under the law from unauthorized use or disclosure by competitors.

For example, customer lists that have taken considerable time, effort, and marketing resources are probably the most common form of protectable trade secret.

However, the right to protect competitively valuable, generally unknown business information must be the subject of reasonable efforts to keep the information secret before it meets the California or federal definition of a protectable “trade secret.”

In a lawsuit alleging COVID-related religious discrimination in violation of Title VII of the Civil Rights Act of 1964, a former employee of MGM Grand Detroit was just awarded $133,000 by a jury in federal District Court in Michigan. As the prevailing party, the plaintiff will also be awarded attorneys’ fees, in an amount determined by the trial judge, that will likely be multiples of the actual monetary award. Yermenian had worked for MGM Grand for 22 years before his discharge.

The jury found that Yermenian had a sincerely held religious belief that the COVID vaccine was immoral and inconsistent with his theological beliefs as an Orthodox Apostolic Christian, because he believed its production was associated with the use of tissue from aborted fetuses.

The jury was not swayed by MGM Grand’s defense that it was unable to reasonably accommodate plaintiff, because permitting Yermenian to work around his co-workers and guests, potentially exposing them to the COVID contagion, would have posed an undue hardship under Title VII.

MGM Grand told the jury that, before implementing the policy, it had consulted the published guidance of the Equal Employment Opportunity Commission for employers regarding COVID-19 vaccinations and religious accommodation.

A very recent California Court of appeal case hammered home the point that the state’s wage and hour laws, and how they are applied, are intentionally skewed in favor of employees—so much so that even provisions of the California Code of Civil Procedure are bent to achieve that end.

In Chavez v. Cal. Collision, LLC, No. A167658 (Cal. Ct. App. Dec. 10, 2024), California’s First Appellate District overturned the trial court’s award of $54,000 in court costs to an employer defendant. The Court did so even though the award of costs would generally have been appropriate under section 998 of the Code of Civil Procedure. Court costs do not include attorneys’ fees, but do include such expenses as filing fees, transcript costs, service of process costs, and expert witness fess.

Section 998 provides that a “plaintiff shall not recover his or her post-offer costs and shall pay the defendant's costs from the time of the offer" if two requirements are met. First, the defendant must make an offer of compromise that the plaintiff does not accept. Second, the plaintiff also does not receive an award greater that defendant’s Section 998 offer in compromise.

The public policy underlying Section 998 is to foster the compromise of disputed claims. The plaintiff receiving a 998 offer of compromise is encouraged to accept the settlement offer if they reasonably stand to gain less than the settlement offer.

While many trade secret disputes can often be nipped in the bud with a stern and timely cease-and-desist letter coupled with diligent monitoring, a very recent federal district court case in Massachusetts illustrates the reality that companies can and will, nonetheless, misappropriate a competitor's trade secrets when they believe the information may be leveraged to generate enough revenue to warrant the legal risk.

Insulet Corp. v. EOFlow Co. Ltd. et al., Case No. 1:23-cv-11780 (D. Mass.) arose out of the departure of several employees from biotech company Insulet Corporation to joint South Korean-owned competitor, EOFlow Company. Several years later, Insulet was forced to protect its trade secret rights by suing EOFlow in federal court for misappropriating IP relating to Insulet's wearable insulin patch technology of which the former employees were aware.

The jury awarded Insulet $452 million in damages against EOFlow and its CEO, $282 million of which were punitive damages. It is believed to be the largest award in a trade secrets case in decades.

chanley@EAGLAwGroup.com