Procedural Posture

Appellant high-end apparel manufacturer discovered that some of its current season products were being sold at respondent, a low-price warehouse store. The manufacturer sued the warehouse store for the sale of stolen property under Pen. Code, § 496, after it refused to disclose its source for the products. The Superior Court of Los Angeles County, California, sustained the warehouse store’s demurrer to the complaint. The manufacturer appealed.

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Overview

The trial court had also ultimately denied the manufacturer discovery of the warehouse store’s sources. The court found that the trial court did not err in denying the manufacturer’s motion to compel discovery because the identity of the warehouse store’s suppliers was a protectable trade secret. The warehouse store showed that the identity of its sources was information that derived economic value from not being generally known, and it introduced evidence indicating that it had taken reasonable efforts to maintain the secrecy of its sources. The court held that the manufacturer properly alleged a cause of action for sale of stolen goods that was sufficient to survive demurrer. The plain language of Pen. Code, § 496, subd. (c), clearly did not restrict the right to bring a civil action to the owner of the stolen property, and the manufacturer’s action appeared to be within the intended scope of the statute. The manufacturer had failed to plead its cause of action for fraud with the necessary particularity. Because the manufacturer also could not allege having suffered losses that would entitle it to restitution, it had no standing to pursue a cause of action for unfair competition.

Outcome

The court reversed the judgment and remanded the matter for further proceedings.

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