Breach of fiduciary duty is best illustrated by Ali v. Fasteners for Retail, Inc., 544 F.Supp.2d 1064 (C.D. Cal. 2008). The firm represented an inventor of software and circuitry that can track electronically the number and type of products removed from or remaining on store shelves. He entered into a two-year Non-Disclosure Agreement (NDA) pursuant to which a large, national supplier of retail shelving agreed to maintain the confidentiality of all information concerning the invention. Based on the NDA, the inventor demonstrated the prototype, and entered into preliminary discussions concerning a joint venture and/or licensing relationship. The meetings led to a term sheet under which the parties agreed to work together to develop an integrated product. When the NDA expired, the national supplier allegedly began designing, developing, testing, and marketing a competing product based on technical and marketing information acquired in confidence from the client (including software source codes for the prototype, and pricing and cost data). The firm successfully defeated a motion to dismiss the complaint. The court rejected arguments that (1) the California Uniform Trade Secrets Act (CUTSA) preempted the breach of fiduciary duty claim and (2) plaintiff had failed to sufficiently allege a confidential relationship which exists whenever a person with justification places trust and confidence in the integrity and fidelity of another. The plaintiff inventor could therefore proceed with his claims for breach of confidence and breach of fiduciary duty.

It is important to note that each case is different. A fiduciary relationship will not necessarily arise when a party, in return for royalties or other promises, entrusts a secret idea to another to develop, patent, and commercially develop. See, e.g., City of Hope National Medical Center v. Genentech, Inc. (2008) 43 Cal. 4th 375. It will depend on a number of factors, including the relative sophistication and bargaining power of the parties, and whether the goal was to achieve a mutually beneficial arrangement, or whether one party had undertaken a fiduciary obligation to act on behalf of and for the benefit of another. See Cleveland v. Johnson (2012) 209 Cal. App. 4th 1315 (promoter owed fiduciary duties to reincorporation investor).

Defamation claims often arise out of business disputes. Defamation occurs when one party publishes to a third-party provably false and disparaging comments about another’s character for honesty, integrity, or the like. Legally speaking, it’s the intentional publication of a false statement of fact that has a natural tendency to injure the plaintiff’s reputation or that causes special damage. Defamation can also include trade libel. Trade libel is an intentional disparagement of the quality of services or products of a business that results in monetary loss or damage. Unlike defamation against a nonpublic person, trade libel does require actual malice, that is, the statement was made with knowledge it was false or with reckless disregard for whether it was true or false.

Defamation can be what was expressly stated or what was implied (suggested). For example, in Yelp v. Superior Court (2017) 17 Cal. App. 5th 1, the firm sued for defamation over a negative online review of a CPA. The review stated: “Too bad there is no zero star option! I made the mistake of using them and had an absolute nightmare. Bill was way more than their quote; return was so sloppy I had another firm redo it and my return more than doubled. If you dare to complain, get ready to be screamed at, verbally harassed, and threatened with legal action. I chalked it up as a very expensive lesson, hope this spares someone else the same.”

On appeal, the court affirmed that review likely contained defamatory content. The review implied that a price hike was not justified; implied that tax return prepared improperly and inaccurately (“was not merely messy, but was prepared improperly and inaccurately—i.e. that Montagna’s work did not comply with the standards of his profession—flaws so significant they necessitated the return being redone by someone else”); expressly stated that tax refund doubled after it the return was redone; and implied that CPA and his staff screamed at, harassed, and threatened client when customer dared to complain, and moreover that they did so without justification. Court noted that: “Indeed, the implied assertion Montagna and his staff will abuse clients without justification is at the heart of Alex M.’s suggestion that any future client should prepare to receive similar treatment.”

When business disputes arise, the principals often publish defamatory statements online, or to colleagues, customers, and vendors. When this happens, consult an attorney immediately. You should send a cease & desist letter, and demand a retraction. Calculating damages to reputation is very difficult, and best to stop the disparaging comments before its too late.

Defamation claims will often trigger an anti-SLAPP motion. SLAPP is an acronym for Strategic Lawsuit Against Public Participation. A SLAPP arises when a party is sued in retaliation for exercising a first amendment right of free speech or right to petition for the redress of grievances (i.e., right file claims or lawsuits). For example, a SLAPP suit occurs when an environmentalist who protests against the development of a highway or condominium project gets sued for libel. The law allows the defendant to file a special motion to dismiss on grounds the lawsuit lacks merit (e.g., the communication is privileged). The motion can be filed soon after the complaint is served. All discovery is stayed. And if the defendant wins, attorney’s fees are awarded (a prevailing plaintiff is only entitled to fees if the motion is deemed frivolous or solely intended to cause unnecessary delay). Also, the parties have the right to an immediate appeal of the order granting or denying the motion. The firm has filed and opposed many anti-SLAPP motions.