procedural posture

Procedural Posture

Plaintiffs, a competing corporation and its owner, sued defendants, a corporation and its owners, for misappropriation of trade secrets and related causes of action. The Superior Court of Orange County (California) struck the answer pursuant to former Code Civ. Proc., § 2023, subd. (b)(4)(A), as a discovery sanction and entered a default judgment. Defendants appealed.

Overview

The complaint included a request for damages in an amount in excess of a sum stated therein. <ahref="https://california-business-lawyer-corporate-lawyer.com/california-laws/california-constitution-article-2-voting-initiative-and-referendum-and-recall/" Article 2 Voting, Initiative and Referendum, and Recall />
The trial court struck the answer as a sanction for intentional destruction of data on the hard drives of several computers. Before default, a statement of damages and a notice of punitive damages were served, seeking amounts that greatly exceeded the sum stated in the complaint. The trial court granted a default judgment for those amounts. The appeals court, in reversing, held that Code Civ. Proc., § 580, limited the award of compensatory damages to the amount specified in the complaint. Code Civ. Proc., § 425.11, which provided for a statement of damages in personal injury or wrongful death cases, was inapplicable because the action was not one for personal injury or wrongful death. A notice of punitive damages was proper under Code Civ. Proc., § 425.115, subd. (f), but the court had to vacate the punitive damage award along with the compensatory damage award. The trial court erred in awarding as compensatory damages the value of the business; lost profits was the correct measure. Ample evidence in the record supported the trial court's decision to grant terminating sanctions.

Outcome

The court reversed and remanded with instructions to vacate the award of compensatory and punitive damages and to conduct a new damages prove-up hearing.