Huong Que, Inc. V Luu

58 Cal.Rptr. 3d 527 (2007)

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Nature of the Case

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Facts

Luu (Ds), husband and wife, sold Huong Que, Inc. to Con (P). P agreed to pay Ds $205,000 in three annual installments. Ds agreed to “act as Managing Agents for a minimum period of four years from January 1, 2003,” and “provide Buyer with business dealings, bookkeeping activities, and design of publishing samples.” The agreement included a paragraph entitled “Covenant not to Compete,” which provided in its entirety, “Shareholders [Ds] shall not directly or indirectly, carry on or engage in, as an owner, the business of publishing services except for publishing Buddhist bible and book.” The contract also included an integration clause. On May 23, 2005, P discovered an e-mail message entitled “address list” in the electronic mailbox of D. Ds had emailed a list of customers for the corporation to ProCalendar. Attached to the e-mail was a text file in Vietnamese, which were the minutes of ProCalendar a new company formed to compete with P and a document which contained 1000 addressed of which 90% were from Huong Que, Inc. P filed a complaint Ds and the Proc Calendar Defendants. P alleged that Ds stopped performing those duties entirely; and that they misappropriated Huong Que's customer list and used it to solicit business for Pro Calendar. P claimed breach of contract, breach of the implied covenant of good faith and fair dealing, breach of the duty of trust and loyalty arising from Ds' positions as managing agents, misappropriation of a trade secret, and tortious interference with Huong Que's relations with its existing customers. P asked for compensatory and punitive damages and temporary and permanent injunctive relief. The trial court issued a temporary restraining order. On a hearing for a preliminary injunction, Ds conceded that Pro Calendar had undertaken to represent a Taiwanese marketer of calendar products, and thus “competed in the calendar distribution business.” They also conceded that they had hosted a lunch at their home in May 2005 at which “the subject of Pro Calendar and its formation was discussed.” Ds denied any substantive involvement in these purported discussions” concerning Pro Calendar's formation and claimed that the list sent was derived independently of Huong Que's customer list. The court found, “The great majority of customer names on this list are customers of Huong Que. Moreover, an extraordinary degree of customer information appearing on both the e-mail list and Huong Que's customer list share the exact same mistakes and errors.” The court issued the injunction. The court enjoined D, and some other defendants, from (1) using the Huong Que customer list; (2) distributing catalogs offering competing calendars to customers on the customer list; (3) soliciting business from customers on the list; and (4) selling competing calendars to customers on the list. Ds appealed.