January 25, 2008 Misappropriation of Trade Secrets, Intentional Interference with Economic Advantage

Mercury Plastics Inc. v. Luben Rabchev, et al. / BC29987


Breach of Fiduciary Duty

Misappropriation of Trade Secrets, Intentional Interference with Economic Advantage

Verdict: $16, 457, 866

Case/Number: Mercury Plastics Inc. v. Luben Rabchev, et al./ BC29987

Court/Date: Los Angeles Superior Central / Jan. 25 2008.

Judge: Hon. Robert H. O'Brien

Attorneys: Plaintiff - Debra L. Korduner (Law Offices of Debra L. Korduner, Los Angeles); Michael A. Taitelman (Freedman + Taitelman, LLP, Los Angeles).

Defendant: Jeffery S. Benice, Costa Mesa); Marc C Forsythe (Goe & Forsythe LLP, Newport Beach).

Technical Expert: Plaintiff - Barbara Luna, forensic accounting, Sherman Oaks.

Facts: Defendant Luben Rabchev was the President and director of Mercury Plastics from its inception in 1987, until his abrupt resignation without notice in July 2003. Defendant John Nakaoka was appointed to Mercury's Board of Directors by Rabchev in March, 2003 and resigned in July 2003. Rabchev and Nakaoka formed a competing company, Infinity Packaging Inc., while they were fiduciaries to Mercury Plastics, taking key sales people (who resigned from Mercury en masse without notice on the same day in July 2003) and soliciting business from Mercury's key customers.

Defendants' Contentions: Defendants contended that damages awarded were excessive, defendants could legally leave without prior notice, defendants could compete with plaintiff after resigning, and plaintiff's damages expert's opinion was based on the misappropriation of trade secrets and interference with plaintiff's contracts with its customers, which claims were dismissed.

Jury Trial: Length 14 days; Deliberations, four hours.

Result: Defendants' motion for directed verdict granted as to misappropriation of trade secrets and intentional interference with economic advantage. Unanimous verdict for $16,457,866 plus $250,000 in punitives against Rabchev and $25,000 in punitives against Nakaoka. Rabchev and Nakaoka were found liable for breach of fiduciary duty; Rabchev, Nakaoka and Infinity Packaging were found liable for conspiracy.

The court granted dendants' motion for directed verdict on the trade secret and intentional contractual interference claims, which resulted in no claim for allegedly soliciting defendants customers after the defendants resigned their employment with plaintiff.

Despite defedant's argument that plaintiff had no evidence of damages for breach of fiduciary duty against defendants Rabchev, Nakaoka and Infinity as a result of the directed verdicts, the court allowed the breach of fiduciary duty to go to the jury.

Other Information: Defendants' motion for summary judgement was erroneaously granted by the Hon. Conrad Aragon in November 2004. Mercury obtained a reversal from the Court of Appeal in November 2005. Defendants' motion for stay of execution of the judgment was granted on Feb 11, 2008.

Filing Date: July 29, 2003