Memorandum of Decision Re: Trade Secrets

DO NOT PUBLISH This case disposition has no value as precedent and is not intended for publication. Any publication, either in print or electronically, is contrary to the intent and wishes of the court.
UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re LAWRENCE M. SYLVESTER,                                               No. 99-10073      Debtor(s). ______________________________________/ C.I.M. INDUSTRIES, INC.,      Plaintiff(s),    v.                                                                                            A.P. No. 99-1054 LAWRENCE M. SYLVESTER,      Defendant(s). _______________________________________/
Memorandum of Decision
     A jury trial was held in state court without a verdict. The state court then dismissed the jury and entered a judgment in favor of plaintiff C.I.M. Industries against debtor and defendant Lawrence Sylvester for injunctive relief and attorneys' fees for willful and malicious misappropriation of trade secrets. C.I.M. now seeks a summary nondischargeable judgment against Sylvester in this adversary proceeding, arguing collateral estoppel.      Sylvester argues that the state judgment is invalid due to a procedural defect. This position does not appear to have merit. In any event, the issue should have been raised in the state court. Since the judgment appears valid on its face and no extrinsic fraud is alleged, the court must presume its validity.      Trade secrets may be misappropriated with or without malicious intent to injure their owner. Where misappropriation was done under a mistaken belief of entitlement, there is insufficient intent to support a judgment of nondischargeability. Matter of Miller, 156 F.3d 598, 603 (5th Cir.1998).      Unlike Miller, the state court in this case specifically found that Sylvester acted willfully and maliciously. Pursuant to California Code of Civil Procedure § 3426.4, an award of attorneys' fees can only be made if the misappropriation was willful and malicious. Therefore, also unlike Miller, the finding was necessary to the judgment.      Sylvester argues that there can be no nondischargeable debt because there were no damages. The court disagrees. The award of attorneys' fees is an item of damages, since it was expressly made due to Sylvester's willful and malicious misappropriation. Statutory attorneys' fees are damages which may be determined to be nondischargeable. Cohen v. de la Cruz, 523 U.S. 213, 140 L.Ed.2d 341, 349 (1998).      For the foregoing reasons, C.I.M.'s motion for summary judgment will be granted. Counsel for C.I.M. shall submit an appropriate form of order granting its motion and an appropriate form of judgment.

Dated: October 25, 1999                                                                               ____________________________                                                                                                                      Alan Jaroslovsky                                                                                                                      United States Bankruptcy