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Duty of Candor

Accusations Are Not Misconduct: The Duty of Candor is Not Limited to “Chesterfieldian Politeness”

Tim Kowal     May 28, 2021

And a Reversal Based on Curious Reasoning

Unpublished opinions usually are unpublished because they are uneventful. But sometimes, unpublished opinions are unpublished maybe, just maybe, because they contain reasoning that might not hold up to scrutiny.

In this case over misappropriation of trade secrets concerning computer chip used in truck engines, the jury found that, yes, the defendant had misappropriated by reverse engineering the plaintiff's algorithms. But the trial court thought differently. It granted a new trial, finding that, other than reverse engineering, the defendants had not been shown to have done anything wrongful.

Court of Appeal's Novel Reasoning Is Apparently Unsupported by Findings

The Second District Court of Appeal reversed in SoCal Diesel, Inc. v. Extrasensory Software, Inc. (D2d1 May 3, 2021) no. B290062 (non-pub.). Yes, it is true that under Civil Code section 3426.1, subdivision (a), “Reverse engineering or independent derivation alone shall not be considered improper means.” (Italics added.) That is, there has to be some other, independent act of wrongdoing. And here, there was apparently no finding of wrongdoing other than the reverse engineering. So the trial court correctly granted new trial overturning the misappropriation verdict.

But just a moment, reasoned the Court of Appeal. The algorithm was governed by a EULA. And the EULA prohibited reverse engineering. Thus, the court concluded, in a fit of creativity, "Reverse engineering accomplished by fraud is not reverse engineering alone. Entering into a EULA with the intention of violating its terms is fraud."

In fact, the Second District held the trial court abused its discretion in failing to deduce and agree with this inventive work product.

In defense of the trial court, I searched the rest of the opinion, and did not find any indication the jury had found the defendants engaged in promissory fraud. In fact, there was no indication this theory was even raised in the trial court, let alone that the jury made any findings on it one way or another. (The subject of the EULA did come up, but apparently the plaintiffs never elicited a direct answer to the question of whether it was even violated: the response elicited was simply that the EULA was never "enforced.")

While a reviewing court may take evidence and make findings in the first instance on appeal under Code of Civil Procedure section 909, I searched the opinion for any indication the court did so; I did not find any.

So there was no fraud finding below. And no fraud finding on appeal. Yet the court's holding is based on fraud.

How to explain this? Well, instead of any regular trial or appellate procedure that might have led to this particular holding, I found in the opinion this, the all-purpose procedural mechanism by which many appellate opinions arrive at similarly surprising reasoning. That mechanism is at follows: At the top of the opinion, the court causes to be displayed: "Not to Be Published in the Official Reports."

So if at oral argument your panel asks you how it can rely on a particular argument that was not raised below or in the briefs, the answer is: "In an unpublished opinion, your honor." That is the true answer, anyway. It is not the correct answer, obviously. But it is the true answer.

Calling Defendant a "Cheater" During Opening Statement and Closing Argument Is Not Misconduct

The defendants also argued that the plaintiff's attorney called them "cheaters" both during opening statements and closing arguments, and that this inflamed the jury against the defendants.

Not so. An attorney “ ‘may vigorously argue his case and is not limited to “Chesterfieldian politeness.” ’ ” (People v. Fields (1983) 35 Cal.3d 329, 363.)

Tim Kowal helps trial attorneys and clients win their cases and avoid error on appeal. He co-hosts the Cal. Appellate Law Podcast at www.CALPodcast.com, and publishes a newsletter of appellate tips for trial attorneys at www.tvalaw.com/articles. His appellate practice covers all of California's appellate districts and throughout the Ninth Circuit, with appellate attorneys in offices in Orange County and Monterey County. Contact Tim at [email protected] or (714) 641-1232.

Tim Kowal is an appellate specialist certified by the California State Bar Board of Legal Specialization. Tim helps trial attorneys and clients win their cases and avoid error on appeal. He co-hosts the Cal. Appellate Law Podcast at CALpodcast.com, and publishes summaries of cases and appellate tips for trial attorneys. Contact Tim at [email protected] or (949) 676-9989.
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